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The U.S. Treasury's 20-year bond has a yield-to-maturity of 2.5%. In order for a 20-year bond of a corporation to have the same price as that of the Treasury it must pay the same coupon. a. True b. False
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The U.S. Treasury's 20-year bond has a yield-to-maturity of 2.5%. In order for a 20-year bond of a corporation to have the same price as that of the Treasury it must pay the same coupon.

a. True
b. False

User John Baum
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1 Answer

5 votes

Answer:

b. False

Step-by-step explanation:

US Treasury bonds are considered risk free investments, so their price is not affected by market risk. On the other hand, a corporation's bond is not a risk free investment and its price is affected by market risk. The higher the risk, the higher the expected return and the lower the price of a security.

User Krunal Indrodiya
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