a. The yield to maturity on a bond
I. is fixed in the indenture
II. is lower for higher risk bonds
III. is the required rate of return for bonds
IV. is generally equal to the coupon interest rate
V. None of the options specified here
b. Benjamin Corp. bonds pays an annual coupon rate of 10% on a face value of $1,000. If investors' requiredrate of return is now 8% on these bonds, they will be priced at:
I. par value, which means market price equals face value
II. a premium over par value, which means market price will be higher than face value
III. a discount to par value, which means market price will be less than face value
IV. can be at a premium or disount from face value
None of the options specified here
c. A bond will sell at a discount (below par value) if:
I. if the required rate of return is less than the coupon rate of the bond
II. if the coupon rate of the bond is more than the required rate of return of the bond
III. required rate of return equals coupon rate of the bond
IV. required rate of return is higher than the coupon rate of the bond
None of the options specified here
d. If market interest rates ______, bond prices _________.
I. increase; increase
II. increase; decline
III. decline; decline
IV. decline; increase