If the current price of a bond is greater than its face value
A)an investor will receive a capital gain by holding the bond until maturity.
B)the yield to maturity must be less than the coupon rate.
C)the coupon rate must be less than the current yield.
D)the coupon rate must be equal to the current yield.

Question

Quizplus · Accepted Answer

When the current price of a bond is greater than its face value, it means the bond is trading at a premium. This occurs because the coupon rate (interest rate) of the bond is higher than the prevailing market interest rates, making the bond more attractive. Therefore, the yield to maturity, which is the total return anticipated on a bond if the bond is held until it matures, must be less than the coupon rate to account for the premium paid over the face value.

If the Current Price of a Bond Is Greater Than