Oldtown Brewerys bonds are selling at par value with a coupon rate of 10 percent. The bonds will mature in 7 years. Coupons are paid annually. If prevailing interest rate (of similar companies) increases, which of the following is correct?

I. yield to maturity will be higher than the coupon rate.

II. coupon rate will increase.

III. the bond will become a discount bond.

IV. current yield will be higher than the coupon rate.

A. II only

B. I, and II only

C. II and III only

D. I, III and IV

E. I, II, III and IV