Fortunate Frames Inc.just issued 20-year,6% coupon bonds at par.Lucky Lenses Inc.has 20-year bonds outstanding that are viewed by investors as having the same risk as Fortunate's bonds.Lucky's bonds are selling at a discount.What does this indicate about the coupon rates on these two bonds?

Question

Quizplus · Accepted Answer

Lucky's bonds are selling at a discount, so its coupon rate must be less than its yield. The yield on Fortunate is 6%, so Lucky's coupon rate is less than 6%.