Which of the following statements is correct? Bond prices and interest rates move in the same direction, i.e., if interest rates rise, so will bond prices. The
Mathematics
akeeler
Question
Which of the following statements is correct?
Bond prices and interest rates move in the same direction, i.e., if interest rates rise, so will bond prices.
The market price of a discount bond will approach the bond's par value as the maturity date approaches. Barring changes in the probability of default, there is no way the value of the bond can fail to increase each year as the time to maturity approaches.
The "current yield" on a noncallable discount bond will normally exceed the bond's yield to maturity.
The "current yield" on a noncallable discount bond will normally exceed the bond's coupon interest rate.
None of the above
Bond prices and interest rates move in the same direction, i.e., if interest rates rise, so will bond prices.
The market price of a discount bond will approach the bond's par value as the maturity date approaches. Barring changes in the probability of default, there is no way the value of the bond can fail to increase each year as the time to maturity approaches.
The "current yield" on a noncallable discount bond will normally exceed the bond's yield to maturity.
The "current yield" on a noncallable discount bond will normally exceed the bond's coupon interest rate.
None of the above
1 Answer

1. User Answers capaeshepp
As rates increases or decreases, the discount rate that is used also changes appropriately.