Bond yields and prices over time A bond investor is analyzing the following annual coupon bonds: Issuing Company Annual Coupon Rate Smith Corporation 6% Irwin Incorporated 12% Johnson, LLC 9% Each bond has 10 years until maturity and the same level of risk. Their yield to maturity (YTM) is 9%. Interest rates are assumed to remain constant over the next 10 years. Using the previous information, correctly match each curve on the graph to its corresponding issuing company. (Hint: Each curve indicates the path that each bonds price, or value, is expected to follow.) Curve A Johnson, LLC

Curve B Smith Corporation

Curve C Irwin Incorporated Based on the preceding information, which of the following statements are true? Check all that apply.

The bonds have the same expected total return. The expected capital gains yield for Irwin Incorporateds bonds is negative. Smith Corporations bonds have the highest expected total return. The expected capital gains yield for Irwin Incorporateds bonds is greater than 12%. If a bond is selling for a price much lower than its par value, it is most likely that the bond is bond.