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Bond X and Bond Y were issued at a premium to par value three years ago....

Bond X and Bond Y were issued at a premium to par value three years ago. Bond X matures in five years, and Bond Y matures in ten years. Both bonds carry the same credit rating. Bond X has a coupon of 7 .25%, and Bond Y has a coupon of 8.00%. If the yield to maturity for both bonds is 7.60% today: A. both bonds are priced at a premium. B. Bond X is priced at a premium, and Bond Y is priced at a discount. C. Bond X is priced at a discount, and Bond Y is priced at a premium.

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Answer #1

B. Bond X is priced at a premium, and Bond Y is priced at a discount.

When coupon rate is less than yield to maturity, bonds are priced at a discount. When coupons rate is more than the yield to maturity, bonds are priced at a premium.

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