$10,000 bond with a bond rate of 4% per year, payable semiannually. The bond has

Question

$10,000 bond with a bond rate of 4% per year, payable semiannually. The bond has a remaining d rate forthe bond will be higher than 4% per year, compounded semiannually 3. You purch ase a s. You pay $9600 for the bond. Which of the following statements is correct? Theyiel a) b) The yield rate for the bond c) ) Cannot be determined without knowing the redemption value for the bond. will be lower than 4% per year, compounded semiannually The yield rate for the bond will be lower than 4% per year, compounded semiannually

Explanation / Answer

Let's see.

You purchase 10000 and you pay 9600 for the bond, now we want to calculate the yield rate of the payment per year:

1-(9600/10000) = 4% per year

So the yield rate, woould be same as its coupon rate.

The other thing, is that in the statements presented, option b and c are the same, so I guess that one of them might be the option where those rate are equal

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