1. If the coupon rate is more than the yield to maturity:

a. A bond trades at a discount

b. A bond trades at a premium

c. A bond trades at par

d. We cannot tell the relationship between the price and par

2. You own a bond of the XYZ Corporation. Yesterday after the market closed the company CEO revealed the SEC was investigating the company for accounting irregularities. The perceived credit quality of the company has deteriorated due to the announcement. What would you expect to happen to the price of the bond?

a. It would rise because the required yield will fall

b. It would fall because the required yield will rise

c. It would rise because the required yield will rise

d. It would fall because the required yield will fall