If the market price of an existing bond rises while its coupon payment stays unchanged, its current yield will generally:
Correct answer: A. Decrease
- A. Decrease
- B. Increase
- C. Remain exactly unchanged
- D. Become equal to its face value
Explanation
Current yield is calculated by dividing the annual coupon payment by the bond's market price. When the price rises but the payment remains fixed, the resulting yield falls.
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