18. Which of the following are characteristics of a Premium Bond? I. The market

Question

18. Which of the following are characteristics of a Premium Bond? I. The market value of the bond is greater than the face value of the bond II. The market yield of the bond is greater than the bond’s coupon rate III. The price of the bond is less than the face value of the bond IV. The price of the bond is greater than the face value of the bond V. The market yield of the bond is less than the bond’s coupon rate A) I, II and IV only B) I, II and III only C) I, IV and V only D) I, III, and V only E) None of the above

Explanation / Answer

Bond yield and bond price has inverse relationship. If yield increase bond price will decrease and if yield decrease bond price will increase.

Hence, correct option is C) I, IV and V only.

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