which of the following statements is correct? A. if a bond selling at premium, t

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.

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