Which of the following statements is CORRECT?
A) if a bond's yield to maturity exceeds its coupon rate, the bond will sell at par.
B) all else equal, if a bond's yield to maturity increases, its price will fall.
C) if a bond's yield to maturity exceeds its coupon rate, the bond will sell at a premium over par.
D) all else equal, if a bond's yield to maturity increases, its current yield will fall.
E) a zero coupon bond's current yield is equal to its yield to maturity.

Question

Quizplus · Accepted Answer

This is known as the inverse relationship between bond prices and yields. When the yield to maturity increases, the present value of the future bond payments decreases, causing the bond price to fall.

Which of the Following Statements Is CORRECT