A customer buys a long-term, 10% Treasury bond with a current yield of 12% and holds the bond until 1 year before maturity. She sells the bond when the short-term T-bill rate is 8%. Which of the following statements are CORRECT?
The bond was purchased at a premium.
The bond was purchased at a discount.
The bond was sold at a premium.
The bond was sold at a discount.
A) II and III.
B) I and III.
C) I and IV.
D) II and IV.
Answer: A) II and III.