An investor purchased a fixed-coupon bond at a time when the bond's yield to maturity was 6.9%. The investor sold the bond prior to maturity and realized a total return of 7.1%. Which of these most likely occurred while the investor owned the bond?

a. Market interest rates declined.

b. Market interest rates increased.

c. The inflation rate increased.

d. The bond's current yield increased above the bond's coupon rate.

Question

Rylee Key

Business

9 November, 07:41

An investor purchased a fixed-coupon bond at a time when the bond's yield to maturity was 6.9%. The investor sold the bond prior to maturity and realized a total return of 7.1%. Which of these most likely occurred while the investor owned the bond?

a. Market interest rates declined.

b. Market interest rates increased.

c. The inflation rate increased.

d. The bond's current yield increased above the bond's coupon rate.

+3

Answers (1)

Know the Answer?

Desirae Obrien · Answer 1

The Correct Answer of the given scenario is A "Market interest rates declined"

Explanation:

Financial specialist bought the bond at YTM of 6.9%, and acknowledged return of 7.1%.

This arrival will involve coupon return and capital increase return.

Financial specialist will have capital addition just when security costs will increment, and to expand security value, advertise loan fee declined.