Which of the following statements is CORRECT?
A) If two bonds have the same maturity,the same yield to maturity,and the same level of risk,the bonds should sell for the same price regardless of their coupon rates.
B) All else equal,an increase in interest rates will have a greater effect on the prices of short-term than long-term bonds.
C) All else equal,an increase in interest rates will have a greater effect on higher-coupon bonds than it will have on lower-coupon bonds.
D) If a bond's yield to maturity exceeds its coupon rate,the bond's price must be less than its maturity value.
E) If a bond's yield to maturity exceeds its coupon rate,the bond's current yield must be less than its coupon rate.

Question

Quizplus · Accepted Answer

D) If a bond's yield to maturity exceeds its coupon rate, the bond's price must be less than its maturity value. This is because the price of a bond inversely relates to its yield; as yields rise above the coupon rate, the price falls below par value to offer a higher return to maturity.

Which of the Following Statements Is CORRECT