question 19 (1 point) last year you purchased a bond with an interest rate of 5 percent. if the interest…

question 19 (1 point) last year you purchased a bond with an interest rate of 5 percent. if the interest rate on the bond market drops to 4 percent, which of the following are correct? i. the interest rate you are earning from this bond is lower. ii. the face value of your bond is lower. iii. you will receive the same amount of coupon payments from the issuer while you are holding the bond. iv. people can offer a lower price to buy your bond today. v. you can sell your bond at todays market for a higher price. iii and v v only ii, iii, and iv i and iii

question 19 (1 point) last year you purchased a bond with an interest rate of 5 percent. if the interest rate on the bond market drops to 4 percent, which of the following are correct? i. the interest rate you are earning from this bond is lower. ii. the face value of your bond is lower. iii. you will receive the same amount of coupon payments from the issuer while you are holding the bond. iv. people can offer a lower price to buy your bond today. v. you can sell your bond at todays market for a higher price. iii and v v only ii, iii, and iv i and iii

Answer

Brief Explanations:

  • I: The interest rate on the bond you hold is fixed at 5%, not lower.
  • II: The face - value of a bond is set at issuance and doesn't change due to market interest rate fluctuations.
  • III: Coupon payments are based on the bond's coupon rate and face - value, which are fixed, so you receive the same amount.
  • IV: When market interest rates drop, the value of existing bonds with higher rates (like yours) increases, so people won't offer a lower price.
  • V: Since your bond has a higher interest rate than the current market rate, its market value has increased, and you can sell it at a higher price.

Answer:

A. III and V