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

Question

A corporate coup bond has a coupon rate of 9%, a face value of $1,000, and matures in 15 years. Which of the following statements in most correct?
A. An investor with a required rate of return of 10% will value the bond at more than $ 1,000
B. An investor who buys the bond for $900 and holds the bond until maturity will have a capital loss.
C. An investor who buys the bond for $900 will have a yield to maturity on the bond greater than 9%.
D. If the bond’s market price is $900, then the annual interest payments on the bond will be $ 81.

Explanation / Answer

C) An investor who buys the bond for $900 will have a yield to maturity on the bond greater than 9%.

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