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solution

Consider a newly issued 5-year, $100 par value, 4% coupon, annual-pay bond. If the market discount rate is 6%, the price of the bond is (show your calculation below)


Which of the following is least likely correct?

A. At a point in time, a decrease (increase) in a bond’s YTM will increase (decrease) its price

B. If a bond’s coupon rate is less than its YTM, its price will be at a discount to par value

C. The percentage decrease in value when the YTM increases by a given amount is
smaller than the increase in value when the YTM decreases by the same amount

D. None of the above


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