Which of the following is necessarily true of coupon bonds?
A) The price exceeds the face value.
B) The coupon rate exceeds the interest rate.
C) The price is equal to the coupon payments.
D) The price is the sum of the present value of coupon payments and the face value.

Question

Quizplus · Accepted Answer

Coupon bonds provide periodic coupon payments to the bondholder until maturity, at which point the face value is returned. Therefore, the price of the coupon bond is the sum of the present value of the coupon payments and the face value, making option D the correct choice. Options A and B are not necessarily true, as the price and coupon rate can vary depending on market conditions. Option C is not true, as the price of the bond includes both the coupon payments and the face value.

Which of the Following Is Necessarily True of Coupon Bonds