A corporate bond has a coupon rate of 8%, a face value of $1,000, and matures in

Question

A corporate bond has a coupon rate of 8%, a face value of $1,000, and matures in 20 years. Which of the following statements is most correct? a) An investor who buys the bond for $1,100 and holds the bond until maturity will have a capital loss. b) If the bond's market price is $900, then the annual interest payments on the bond will be $72. c) An investor with a required return of 10% will value the bond at more than $1,000. d) The yield to maturity on the bond must be greater than 8% because of the time value of money and the long time to maturity.

Explanation / Answer

a) An investor who buys the bond for $1,100 and holds the bond until maturity will have a capital loss

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