When comparing two bonds the following statement is not true for a comparable "apple to apple"...

When comparing two bonds the following statement is not true for a comparable "apple to apple" comparison

Should have the same term to maturity
Should have the same risk class
Can have different coupons
Can have different yields.
Can have different prices

Expert Solution

Should have the same term to maturity:

"Not True". When comparing two bonds, its not necessary that both the bonds have the same maturities, different bonds have different maturities.

Should have the same risk class

While comparing two different bonds, they need to have same risk class, it makes the comparison apple to apple.

Can have different coupons:

Bonds can have different Coupons while comparison, but the yields should be comparable.

Can have different yields.

"Not True". Bonds may have different maturities, different coupons, but the bonds need to be brought to comparable and similar yields so as to make a valid apple to apple comparison.

Can have different prices

Bonds prices changes on a daily basis, based on different parameters like interest rates, rating of the company, demand etc, hence the prices will vary, It will not be wise to give too much importance to prices while comparing two bonds.

jeff jeffy answered 2 years ago

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