Which of the following statement is CORRECT? If a coupon bond is selling at par,

Question

Which of the following statement is CORRECT? If a coupon bond is selling at par, its current yield equals its yield to maturity If a coupon bond is selling at a discount, its price will continue to decline until it reaches its par value at maturity If interest rates increase, the price of a 10-year coupon bond will decline by greater percentage than the price of a 10-year sero coupon bond If a bond's yield to maturity exceeds its annual coupon, then the bond will trade at a premium If a coupon bond is selling at a premium, its current yield equals its yield to maturity

Explanation / Answer

If a coupon sells as par it means its current yield is equal to its yield to maturity, because yield to maturity differs from current yield only when there is difference in Par value and market price of the bond.

Hence First statement is correct .

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