An investor is considering buying one of two 10-year, $1,000 face value, noncallable bonds: Bond A has a 7% annual coupon, while Bond B has a 9% annual coupon. Both bonds have a yield to maturity of 8%, and the YTM is expected to remain constant for the next 10 years. Which of the following statements is CORRECT?
A. Bond B has a higher price than Bond A today, but one year from now the bonds will have the same price.
B. One year from now, Bond A's price will be higher than it is today.
C. Bond A's current yield is greater than 8%.
D. Bond A has a higher price than Bond B today, but one year from now the bonds will have the same price.
E. Both bonds have the same price today, and the price of each bond is expected to remain constant until the bonds mature.
Answer: B
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