Question

Is this bond currently trading at a​ discount, at​ par, or at a​ premium? Explain. ​(Select the best choice​ below.) A. Because the yield to maturity is less than the coupon​ rate, the bond is trading at a discount. B. Because the yield to maturity is greater than the coupon​ rate, the bond is trading at par. C. Because the yield to maturity is less than the coupon​ rate, the bond is trading at a premium. D. Because the yield to maturity is greater than the coupon​ rate, the bond is trading at a premium.

Answer 1

A. Because the yield to maturity is less than the coupon​ rate, the bond is trading at a discount. FALSE

Explanation: If the yield to maturity (YTM) is less than the Coupon rate (CR) the bond is trading at a premium

B. Because the yield to maturity is greater than the coupon​ rate, the bond is trading at par. FALSE

Explanation: If the yield to maturity (YTM) is greater than the Coupon rate (CR) the bond is trading at a discount.

C. Because the yield to maturity is less than the coupon​ rate, the bond is trading at a premium. TRUE

D. Because the yield to maturity is greater than the coupon​ rate, the bond is trading at a premium. TRUE