Which of the following statements is CORRECT?
A) If the Federal Reserve unexpectedly announces that it expects inflation to increase, then we would probably observe an immediate
Increase in bond prices.
B) The total yield on a bond is derived from dividends plus changes in
The price of the bond.
C) Bonds are riskier than common stocks and therefore have higher
Required returns.
D) Bonds issued by larger companies always have lower yields to
Maturity (less risk) than bonds issued by smaller companies.
E) The market value of a bond will always approach its par value as its maturity date approaches, provided the bond's required return remains constant.

Question

Quizplus · Accepted Answer

As a bond approaches its maturity date, its market value tends to converge towards its par value, assuming the required return remains constant.

Which of the Following Statements Is CORRECT