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ACL Ltd recently issued bonds paying a fixed annual coupon of 6% p.a. and maturing in 4 years time. The yield to maturity on these
ACL Ltd recently issued bonds paying a fixed annual coupon of 6% p.a. and maturing in 4 years time. The yield to maturity on these bonds is 8% p.a. If market interest rates fall, what is most likely to happen to the price of the bonds?
Group of answer choices
a The bonds will now trade at a premium.
b One cannot say anything about the price of the bonds without additional information.
c The bonds will now trade at a discount.
d The bonds will now trade at par.
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