FIN 534 RANK Imagine Your Future /fin534rank.com FIN 534 RANK Imagine Your Future /fin534rank.com - Page 84

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. 2. The bond is selling below its par value. 3. The bond is selling at a discount. 4. If the yield to maturity remains constant, the bond's price one year from now will be lower than its current price. 5. The bond's current yield is greater than 9%. 29. A 10-year corporate bond has an annual coupon of 9%. The bond is currently selling at par ($1,000). Which of the following statements is CORRECT?