A corporate bond has a coupon rate of 9%, a face value of $1,000, and matures in

Question

A corporate bond has a coupon rate of 9%, a face value of $1,000, and matures
in 15 years. Which of the following statements is most correct?

a. An investor with a required return of 10% will value the bond at more than
$1,000.
b. An investor who buys the bond for $900 will have a yield to maturity on the
bond greater than 9%.
c. An investor who buys the bond for $900 and holds the bond until maturity
will have a capital loss.
d. If the bond’s market price is $900, then the annual interest payments on the
bond will be $81.
57) A $1,000 par value 12-year bond with a 9 percent coupon rate

Explanation / Answer

A bond that pays 1 coupon(s) of 9% per year, that has a market value of $900.00, and that matures in 15 years will have a yield to maturity of 10.34%, which is greater than 9%. The answer is then B.

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