Homework Answers
True statement is Option A
Based on the relation between market interest rates, coupon rate and price, when market interest rate is higher than coupon rate, bond price < par value.
Statement 2 is incorrect. As maturity date approaches, the duration of bond would reduce and so would it volatility as well
Statement 3 is incorrect. Bond prices and interest rates are inversely related.
Statement 4 is incorrect. Long term bonds have higher duration and are more sensitive to interest rates hence.
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