. A 12-year bond has an annual coupon of 9%. The coupon rate will remain fixed until the bond matures. The bond has a yield to maturity of 7%. Which of the following statements is CORRECT? a. If market interest rates decline, the price of the bond will also decline. b. The bond is currently selling at a price below its par value. c. If market interest rates remain unchanged, the bond’s price one year from now will be lower than it is today. d. The bond should currently be selling at its par value. e. If market interest rates remain unchanged, the bond’s price one year from now will be higher than it is today.

Bonds have an inverse relationship to interest rates; when interest rates rise, bond prices fall, and vice-versa. But as the market didn`t suffer a variation, and the price of the something always is more higher in the present, it means that our bond is going to value less in the future (due to the fact that there were no variation on the market), it would only worth more if the interest rate go down.