Which of the following statements is CORRECT? a. A bond is likely to be called i

Question

Which of the following statements is CORRECT?

a. A bond is likely to be called if its coupon rate is below its YTM.

b. A bond is likely to be called if its market price is below its par value.

c. Even if a bond’s YTC exceeds its YTM, an investor with an investment horizon longer than the bond’s maturity would be worse off if the bond were called.

d. A bond is likely to be called if its market price is equal to its par value.

e. A bond is likely to be called if it sells at a discount below par.

Please, explain why?

Explanation / Answer

c. Even if a bond’s YTC exceeds its YTM, an investor with an investment horizon longer than the bond’s maturity would be worse off if the bond were called.

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