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3. A 10-year zero coupon bond.
4. A 1-year bond with a 15 percent coupon.
24. A 12-year bond has an annual coupon rate of 9%. The coupon rate
will remain fixed until the bond matures. The bond has a yield to
maturity of 7%. Which of the following statements is CORRECT?
1. The bond is currently selling at a price below its par value.
2. If market interest rates decline today, the price of the bond will also
decline today.
3. If market interest rates remain unchanged, the bond’s price one year
from now will be lower than it is today.
4. All of the statements above are correct.
5. None of the statements above is correct.
25. A 10-year bond pays an annual coupon. The bond has a yield to
maturity of 8 percent. The bond currently trades at a premium--its price
is above the par value of $1,000. Which of the following statements is
CORRECT?
1. If the yield to maturity remains at 8 percent, then the bond’s price will
decline over the next year.
2. The bond’s current yield is less than 8 percent.
3. If the yield to maturity remains at 8 percent, then the bond’s price will
remain the same over the next year.
4. The bond’s coupon rate is less than 8 percent.
5. If the yield to maturity increases, then the bond’s price will increase.