A bond with 14 years to maturity and a coupon rate of 6.375 percent has a yield to maturity (YTM) of 4.5 percent. Assuming the bond’s YTM remains constant, the bond’s value as it approaches maturity will most likely: A. Increase B. Decrease C. Remain constant D. Be equal to zero E. None of the above
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the answer is A I think it right but E also is write ans
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Answer: B
Explanation:
If time is changing, then:
Bonds where the yield to maturity is greater than the coupon rate will increase in value.
Bonds where the yield to maturity is less than the coupon rate will decrease in value.
Bonds where the yield is equal to the coupon rate will be priced at 100% of the face value and will not change through time.
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