Which of the following statements about bonds is most correct?
A) The current yield on a bond is fixed over the life of the bond.
B) The coupon rate on bond changes periodically on most long-term bonds,
C) The yield to maturity on a bond is fixed as long as the bond is held until maturity.
D) The price of a bond increases as the market interest rates increase.

Question

Quizplus · Accepted Answer

The yield to maturity on a bond is fixed as long as the bond is held until maturity. This is because the yield to maturity takes into account the discounted present value of all future cash flows, including interest payments and the principal repayment at maturity. The coupon rate on the bond, which is the fixed annual interest rate stated on the bond, does not change over the life of the bond. However, the price of a bond does fluctuate with changes in market interest rates, as reflected in the bond's yield to maturity.

Which of the Following Statements About Bonds Is Most Correct