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Homework answers / question archive / ACL Ltd recently issued bonds paying a fixed annual coupon of 6% p

ACL Ltd recently issued bonds paying a fixed annual coupon of 6% p

Finance

ACL Ltd recently issued bonds paying a fixed annual coupon of 6% p.a. and maturing in 4 years’ time. The yield to maturity on these bonds is 8% p.a. If market interest rates fall, what is most likely to happen to the price of the bonds?

Group of answer choices

a The bonds will now trade at a premium.

b One cannot say anything about the price of the bonds without additional information.

c The bonds will now trade at a discount.

d The bonds will now trade at par.

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