Question

Which of the following statements is INCORRECT. All else equal,

1.If a bond’s yield-to-maturity

(YTM, i.e., market interest rate) is greater than its coupon rate, then the bond is trading at a premium.

2.The estimated market price of a bond is the sum of its future discounted cash flows.

3.Duration measures the sensitivity of a bond’s price to changes in interest rate.

4.If a bond’s market value is equal to its par amount, then its YTM will be equal to its coupon rate.

Finance