Bond X has an 8 percent annual coupon, Bond Y has a 10 percent annual...
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Finance
Bond X has an 8 percent annual coupon, Bond Y has a 10 percent annual coupon, and Bond Z has a 12 percent annual coupon. Each of the bonds has a maturity of 10 years and a yield to maturity of 10 percent. Which of the following statements is most correct?
A. If market interest rates decline, all of the bonds will have an increase in price, and Bond Z will have the largest percentage increase in price.
B. Bond X has the greatest reinvestment rate risk.
C. If market interest rates increase, Bond Xs price will decline, Bond Zs price will increase, and Bond Ys price will remain the same.
D. If market interest rates remain at 10 percent, Bond Ys price will be lower one year from today.
E. If market interest rates remain at 10 percent, Bond Xs price will be higher one year from now than it is today.
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