Which of the following statements is correct? A. The price of a discount bond wi

ID: 2679230 • Letter: W

Question

Which of the following statements is correct?

A. The price of a discount bond will increase over time, assuming that the bond's yield to maturity remains constant.

B. For a given firm, its debentures are likely to have a lower yield to maturity than its mortgage bonds.

C. All else equal, a bond that has a coupon rate of 10% will sell at a discount if the required return for bonds of similar risk is 8%.

D. When large firms are in financial distress, they are almost always liquidated, whereas smaller firms are generally reorganized.

E. The total return on a bond during a given year is based only on the coupon interest payments received.

I'm thinking A, but I wanted to be sure...

The price of a discount bond will increase over time, assuming that the bond's yield to maturity remains constant.

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