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Author Question: Three $1,000 face value bonds that mature in 20 years have the same level of risk, hence their YTMs ... (Read 48 times)

ksmithunr

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on: Aug 7, 2023
Three $1,000 face value bonds that mature in 20 years have the same level of risk, hence their YTMs are equal. Bond A has a 15% annual coupon, Bond B has a 13% annual coupon, and Bond C has a 12% annual coupon. Bond B sells at par. Assuming interest rates remain constant for the next 20 years, which statement about these bonds is true?

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The required return on all these bonds is 15%.


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Bond A sells at a premium (its price is greater than par), and its price is expected to decrease over the next year.


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Bond C sells at a discount (its price is less than par), and its price is expected to decrease over the next year.


◦

Over the next year, the prices of Bonds A, B, and C are expected to remain at their current levels until maturity since they have the same YTM.

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Marked as best answer by ksmithunr on Aug 7, 2023

Harsh06

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Reply #1 on: Aug 7, 2023
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ksmithunr

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Reply 2 on: Aug 7, 2023
Great answer, keep it coming :)

upturnedfurball

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Reply 3 on: Yesterday
Wow, this really help

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