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Basic Question 3 of 19
If the required return on a bond does not change from year to year, then ______ over the same period if you ignore changes in default risk.
B. the price of a convertible bond will rise
C. the price of a bond selling at par will remain unchanged
D. the price of a perpetual bond will rise
E. the price of a premium bond will rise
A. the price of a discount bond will fall
B. the price of a convertible bond will rise
C. the price of a bond selling at par will remain unchanged
D. the price of a perpetual bond will rise
E. the price of a premium bond will rise
User Contributed Comments 6
| User | Comment |
|---|---|
| todolist | if expected rate of return is unchanged, nothing will change with the bond |
| dah62 | None of the variables will change but the price will unless everything balances as is the case with selling at par.... |
| jpducros | Why not B ? Hasn't a convertible option value an inverse relationship with time to maturity ? |
| johntan1979 | Convertible = benefit investor = selling price higher (premium) Price will fall until par |
| Kevdharr | Price of a bond gradually moves closer to par as maturity approaches. If a bond is already selling at par, it will remain at par all other things held constant. |
| farhan92 | "pull to par" |
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Learning Outcome Statements
identify the relationships among a bond's price, coupon rate, maturity, and yield-to-maturity
CFA® 2024 Level I Curriculum, Volume 4, Module 6.