CFA Practice Question

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CFA Practice Question

If the required return on a bond does not change from year to year, then ______ over the same period if you ignore changes in default risk.

A. the price of a discount bond will fall
B. the price of a convertible bond will rise
C. the price of a bond selling at par will remain unchanged
D. the price of a perpetual bond will rise
E. the price of a premium bond will rise
Correct Answer: C

User Contributed Comments 6

User Comment
todolist if expected rate of return is unchanged, nothing will change with the bond
dah62 None of the variables will change but the price will unless everything balances as is the case with selling at par....
jpducros Why not B ? Hasn't a convertible option value an inverse relationship with time to maturity ?
johntan1979 Convertible = benefit investor = selling price higher (premium)

Price will fall until par
Kevdharr Price of a bond gradually moves closer to par as maturity approaches. If a bond is already selling at par, it will remain at par all other things held constant.
farhan92 "pull to par"
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