The yield on the bond declines

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1. A coupon bond that pays interest annually is selling at par value of $1,000, matures in 5 years, and has a coupon rate of 9%. The yield to maturity on this bond is:

A. 8.0%

B. 8.3%

C. 9.0%

D. 10.0%

2. You have an obligation to pay $1,488 in four years and 2 months. In which bond would you invest your $1,000 to accumulate this amount, with relative certainty, even if the yield on the bond declines to 9.5% immediately after you purchase the bond?

A. a 6-year; zero-coupon bond B. a 5-year; 10% coupon bond C. a 5-year; zero-coupon bond D. a 4-year; 10% coupon bond

Reference no: EM131360782

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