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17. A Treasury bond has an 8% annual coupon and a 7.5% yield to
maturity. Which of the following statements is CORRECT?
1 The bond has a current yield greater than 8 percent.
2 The bond sells at a price above par.
3. If the yield to maturity remains constant, the price of the bond is
expected to fall over time.
4. Statements b and c are correct.
5 All of the statements above are correct.
18. Which of the following bonds has the greatest interest rate
price risk?
1) A 10-year $100 annuity.
2) All 10-year bonds have the same price risk since they have the same
maturity.
3) A 10-year, $1,000 face value, zero coupon bond.
4) A 10-year, $1,000 face value, 10% coupon bond with annual interest
payments.
5) A 10-year, $1,000 face value, 10% coupon bond with semiannual
interest payments
19. Which of the following statements is CORRECT?
A time line is not meaningful unless all cash flows occur annually.
Time lines are not useful for visualizing complex problems prior to
doing actual calculations.