A 10 year annual coupon bond was issued 4 years ago at par. Since then the bond's yield to maturity (YTM) has decreased from 9% to 7%.

1. A 10 year annual coupon bond was issued 4 years ago at par. Since then the bond's yield to maturity (YTM) has decreased from 9% to 7%. Which of the following statements is true about the current market price of the bond?

A) The bond is selling at a discount

B) The bond is selling at par

C) The bond is selling at premium

D) The bond is selling at book value

2. Assume that a constant growth stock is currently selling at its equilibrium price of $43.20 per share. All else constant, if the required rate of return of the stock decreases, the price of the stock will:

A) Increase

B) Decrease

C) Remain unchanged

D) Either increase or decrease depending on the dividend paid in year 0

3. Using the constant dividend growth model to value a stock assumes which of the following?

A) The dividend will grow at a constant rate forever

B) The required rate of return will never vary from the current rate

C) The dividend will remain the same throughout the life of the company

D) The growth rate is greater than the required return

E) Both a & b are correct statements

Please give a reasons why you chose your answers, thank you