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Which of the following statements is FALSE? A. When a bondissuer’s default probability increases, its...

Which of the following statements is FALSE? A. When a bond issuer’s default probability increases, its YTM decreases. B. Yield to Maturity (YTM) is set by market. C. When YTM changes over time, coupon rate and coupon payments remain the same. D. Coupon rate is determined by the bond issuer.

Solutions

Expert Solution

When a bond issuer’s default probability increases, its YTM decreases. This statement is false because when default probability increases, its YTM increases.

Option A is correct.

jeff jeffy answered 2 years ago
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