Which of the following statements regarding bond prices and yields is correct? I
ID: 1184073 • Letter: W
Question
Which of the following statements regarding bond prices and yields is correct? I. when the yield to maturity rises, the present value of coupon payments decreases. II. when the current yield rises, the bond price falls and the yield maturity rises. III the current yield and the yield to maturity always move in opposite directions. IV the yield on a discount basis understates the yield to maturity. V the current yield better estmates the yield to maturity for a long term bonds as compared to short term bonds .Explanation / Answer
I think the following is correct only. Please rate my answer. I. when the yield to maturity rises, the present value of coupon payments decreases.