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    Question

    Which of the following is NOT CORRECT about value of a

    bond? i. If the bond is at discount, the price will decline over time towards its par value ii. If a bond is at par, its price will remain the same till the maturity iii. A zero coupon bond has only one cash flow
    A Only i Correct Answer Incorrect Answer
    B Only i and ii Correct Answer Incorrect Answer
    C Only ii & iii Correct Answer Incorrect Answer
    D Only iii Correct Answer Incorrect Answer
    E All the above are correct Correct Answer Incorrect Answer

    Solution

    If the bond is at premium, the price will decline over time towards its par value and if the bond is at discount, the price will increase over time towards its par value Zero coupon bonds have no coupon payments therefore the only cash flow is the payment at maturity of the bond.

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