which of the following statements is correct? A. if a bond selling at premium, t
ID: 2629607 • Letter: W
Question
which of the following statements is correct?
A. if a bond selling at premium, this implies that the bond'd yield to maturity exceeds its coupon rate
B. If a coupon bond is selling at par, its current yield equals its yield to maturity.
c. if rates fall afer its issue, a zero coupon bond could trade for an amount above its par value
d. if rates fall rapidly, a zero coupon bond's expected capital gains yield could become negative
e. if a firm is in financial distress, its bonds yield to maturity is likely to fall.
Explanation / Answer
Hi
Statement b is correct; the other statements are false.
If a bond is selling at a premium, the YTM would be less than the coupon rate. In addition, as long as interest rates are greater than zero, zeros should never trade above par.
Thank you.