Two bonds are identical except for their maturity. The bonds have a coupon rate that is greater than
their yield to maturity. Which of the following is true when comparing the two bonds?
A) The longer maturity bond has a greater discount (is priced farther below par).
B) The longer maturity bond has a smaller premium (is priced above par but closer to par).
C) The longer maturity bond has a smaller discount (is priced below par but closer to par).
D) The longer maturity bond has a greater premium (is priced farther above par).
D
You might also like to view...
The effectiveness of entity-wide controls may reduce the extent of testing of transaction controls
a. True b. False Indicate whether the statement is true or false
A person who issues a negotiable instrument based on false statements by the other party will be able to avoid payment on that instrument to any party.
Answer the following statement true (T) or false (F)
For a risk-indifferent manager, no change in return would be required for an increase in risk
Indicate whether the statement is true or false
The current yield is greater than the coupon rate for a bond selling above par value
Indicate whether the statement is true or false