Yield to maturityThe Salem Company bond currently sells for $835.74, has a coupon interest rate of 13% and a $1000 par value, pays interest annually, and has 14 years to maturity.

a. The yield to maturity on this bond is %. (Round to three decimal places.)

b. Explain the relationship that exists between the coupon interest rate and yield to maturity and the par value and market value of a bond. (Select the best answer below.)

A.

The market value of the bond approaches its par value as the time to maturity declines. The yield to maturity approaches the coupon interest rate as the time to maturity increases.

B.

The market value of the bond approaches its par value as the time to maturity increases. The yield to maturity approaches the coupon interest rate as the time to maturity increases.

C.

The market value of the bond approaches its par value as the time to maturity increases. The yield to maturity approaches the coupon interest rate as the time to maturity declines.

D.

The market value of the bond approaches its par value as the time to maturity declines. The yield to maturity approaches the coupon interest rate as the time to maturity declines.

Which one of the choices above are correct?