Problem: Which one of the following statements is most correct?
a. All else equal, a bond that has a coupon rate of 10% will sell at a discount if the required rate of return for a bond of similar risk is 8%.
b. Debentures generally have a higher yield to maturity relative to mortgage bonds.
c. If there are two bonds with equal (time to) maturity and credit (default) risk, the bond which is callable will have a higher yield to maturity than the bond which is non - callable.
d. Choices a and c are correct.
e. Choices b and c are correct.
Discuss fully the reasons for your choice, the discuss briefly why the other choices are not correct.