A 10year corporate bond has an annual coupon of 9 The bond i

A 10-year corporate bond has an annual coupon of 9%. The bond is currently selling at par ($1,000). Which of the following statements is NOT CORRECT? The bond\'s yield to maturity is 9%. The bond\'s current yield is 9%. If the bond\'s yield to maturity remains constant, the bond will continue to sell at par. The bond\'s current yield exceeds its capital gains yield. The bond\'s expected capital gains yield is positive.

Solution

The incorrect statement is

The bond\'s current yield exceeds its capital gains yield

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Reason: The bonds yield to mat is 9% and also current yield 9% hence continue to sell at part.

So the above 3 are right.

The bonds expected capital gains yield cannot be less than 0 hence positive is right statement.

Only incorrect is the

The bond\'s current yield exceeds its capital gains yield