Question

Choose all correct statements.

1. The yield to maturity on a discount bond exceeds the bond's coupon rate
2. The higher the yield to maturity, the lower the current price of the bond.
3. All else equal, the current price of a bond increases when the coupon rate decreases.
4. The regular interest payment of a bond is called the coupon payment.

Answer 1

Solution :-

The Statement (A) that The yield to maturity on a discount bond exceeds the bond's coupon rate is Correct

The Statement (B) that is The higher the yield to maturity, the lower the current price of the bond is Correct

The Statement (C) that is All else equal, the current price of a bond increases when the coupon rate decreases is Incorrect As there is a direct relation between Coupon rate and Price of Bond

The Statement (D) that is The regular interest payment of a bond is called the coupon payment. is Correct

Therefore the statement (a) , (b) and (d) are Correct

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