Question

When the market interest rate rises above the coupon rate for a particular quality of bond, the "current yield": will be below the coupon rate will be the same as the coupon rate will be above the coupon rate cannot be determined

Answer 1

Answer: will be above the coupon rate

Explanation:

The Coupon rate is a fixed rate that a bond issuer pays to it's bond holders. The Current Yield however is calculated by dividing the Coupon payment by the Price of the bond.

When Market interest rises above the Coupon Rate, the price of the bond decreases in the market and vice versa.

Because the price of the bond is now less and it is the divisor of the Coupon rate to get the Yield, it will give a higher percentage which will be more than the Coupon rate.