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26. Which of the following statements is CORRECT?
One advantage of a zero coupon Treasury bond is that no one who owns
the bond has to pay any taxes on it until it matures or is sold.
Long-term bonds have less interest rate price risk but more reinvestment
rate risk than short-term bonds.
If interest rates increase, all bond prices will increase, but the increase
will be greater for bonds that have less interest rate risk.
Relative to a coupon-bearing bond with the same maturity, a zero
coupon bond has more interest rate price risk but less reinvestment rate
risk.
Long-term bonds have less interest rate price risk and also less
reinvestment rate risk than short-term bonds.
27. Which of the following statements is CORRECT?
A zero coupon bond's current yield is equal to its yield to maturity.
If a bond’s yield to maturity exceeds its coupon rate, the bond will sell at
par.
All else equal, if a bond’s yield to maturity increases, its price will fall.
If a bond’s yield to maturity exceeds its coupon rate, the bond will sell at
a premium over par.
All else equal, if a bond’s yield to maturity increases, its current yield
will fall.
28. A 10-year bond with a 9% annual coupon has a yield to maturity of
8%. Which of the following statements is CORRECT?
1. If the yield to maturity remains constant, the bond's price one year
from now will be higher than its current price.