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Bond X has an 8 percent annual coupon, Bond Y has a 10 percent annual...

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Finance

Bond X has an 8 percent annual coupon, Bond Y has a 10 percent annual coupon, and Bond Z has a 12 percent annual coupon. Each of the bonds has a maturity of 10 years and a yield to maturity of 10 percent. Which of the following statements is most correct?
  • A. If market interest rates decline, all of the bonds will have an increase in price, and Bond Z will have the largest percentage increase in price.
  • B. Bond X has the greatest reinvestment rate risk.
  • C. If market interest rates increase, Bond Xs price will decline, Bond Zs price will increase, and Bond Ys price will remain the same.
  • D. If market interest rates remain at 10 percent, Bond Ys price will be lower one year from today.
  • E. If market interest rates remain at 10 percent, Bond Xs price will be higher one year from now than it is today.

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