Which of the following bonds will be priced at par if the yield to maturity for

Question

Which of the following bonds will be priced at par if the yield to maturity for all of the bonds is 7%?

I) A 5-year maturity bond with a 7% coupon rate that makes annual coupon payments.

II) A 7-year maturity bond with a 7% coupon rate that makes semi-annual coupon payments.

III) A 9-year maturity bond with a 7% coupon rate that makes quarterly coupon payments.

IV) An 11-year maturity bond with a 7% coupon rate that makes weekly coupon payments.

Answer options:

I only

I and II only

II only

III and IV only

All of the bonds will be priced at par.

Explanation / Answer

Answer: All of the bonds will be priced at par.

Because YTM is equal to coupon rate.

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