You observe the following yields on the market:
10-year Indian bond issued in local currency: 8%
8-year Indian bond issued in US dollar: 6%
10-year US bond issued in US dollar: 4%
8-year US bond issued in US dollar: 3%
Which of the following statement is/are true?
To determine which statements are true based on the given yields, we need to compare the yields of the different bonds.
Statement 1: The yield on the 10-year Indian bond is higher than the yield on the 8-year Indian bond.
To compare the yields of the Indian bonds, we see that the yield on the 10-year Indian bond is 8% while the yield on the 8-year Indian bond is not given. Without that information, we cannot determine if this statement is true.
Statement 2: The yield on the 10-year Indian bond is higher than the yield on the 10-year US bond.
To compare the yields of the 10-year Indian bond and the 10-year US bond, we see that the yield on the 10-year Indian bond is 8% while the yield on the 10-year US bond is 4%. Since 8% is higher than 4%, this statement is true.
Statement 3: The yield on the 8-year Indian bond is higher than the yield on the 8-year US bond.
To compare the yields of the 8-year Indian bond and the 8-year US bond, we see that the yield on the 8-year Indian bond is not given while the yield on the 8-year US bond is 3%. Without the yield on the Indian bond, we cannot determine if this statement is true.
Based on the given information, only statement 2 is true.