Question
Which of the following would be correct assuming that interest rates decrease? A. The price of a bond will decrease while the reinvestment income will
Which of the following would be correct assuming that interest rates decrease?
A. The price of a bond will decrease while the reinvestment income will increase.
B. The price of a bond will decrease while the reinvestment income will decrease.
C. The price of a bond will increase while the reinvestment income will decrease.
D. The price of a bond will increase while the reinvestment income will increase.
E. none of the above is correct.
Which of the following is a false statement?
A. The yield to maturity is also known as the total return for a bond.
B. The yield to maturity is also known as the internal rate of return of a bond.
C. The yield to maturity is composed of the capital gain yield and the current yield.
D. The yield to maturity assumes that the intermediate cash flows are invested at the YTM.
E. The yield to maturity assumes that the intermediate cash flows are invested at the current market rate of return.
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