Currently, a company issues 5% Aaa/AAA debentures at par. Two years ago, the corporation issued 4% AAA-rated debentures at par. Which of the following statements regarding the outstanding 4% issue are TRUE?
The dollar price per bond will be higher than par.
The dollar price per bond will be lower than par.
The current yield on the issue will be higher than the coupon.
The current yield on the issue will be lower than the coupon.
A) II and III.
B) I and III.
C) I and IV.
D) II and IV.
Answer: A) II and III.