A 6 percent, annual coupon bond is currently selling at a premium and matures in
ID: 2796856 • Letter: A
Question
A 6 percent, annual coupon bond is currently selling at a premium and matures in 7 years. The bond was originally issued 3 years ago at par. Which one of the following statements is accurate in respect to this bond today?
The face value of the bond today is greater than it was when the bond was issued.
The bond is worth less today than when it was issued.
The yield-to-maturity is less than the coupon rate.
The coupon rate is greater than the yield-to-maturity.
A.The face value of the bond today is greater than it was when the bond was issued.
B.The bond is worth less today than when it was issued.
C.The yield-to-maturity is less than the coupon rate.
D.The coupon rate is greater than the yield-to-maturity.
Explanation / Answer
The correct answer is C.
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YTM is the rate investor get if he hold the bond till maturity. Since market interest rate is less than
The bonds interest rate, the YTM will be less than the coupon rate.
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