Question

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Which of the following is NOT true? Group of answer choices Compared to this year, a...

Which of the following is NOT true?

Group of answer choices

Compared to this year, a discount bond’s price will increase next year, everything else equal.

Compared to this year, a premium bond’s price will decrease next year, everything else equal.

Compared to this year, a par bond’s price will remain constant next year, everything else equal.

Compared to this year, a premium bond’s price will increase next year, everything else equal.

Solutions

Expert Solution

Compared to this year, a discount bond’s price will increase next year, everything else equal.

For a discount bond, the price of the bond is lower than par value and it keeps on getting increased as time passes until it became equal to face value at maturity.

Hence this statement is correct.

Compared to this year, a premium bond’s price will decrease next year, everything else equal.

For a premium bond, the price of the bond is higher than par value and it keeps on getting decreased as time passes until it became equal to face value at maturity.

Hence this statement is correct.

Compared to this year, a par bond’s price will remain constant next year, everything else equal.

For a par bond, the price of the bond is equal to par value and it remains equal till maturity.

Hence this statement is correct.

Compared to this year, a premium bond’s price will increase next year, everything else equal.

For a premium bond, the price of the bond is higher than par value and it keeps on getting decreased as time passes until it became equal to face value at maturity.

Hence this statement is not correct.

Please let me know in case you have any queries and I will be happy to assist you.

jeff jeffy answered 2 years ago
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