If a bond is purchased at a price below the face value,the yield to maturity will be:
A)greater than the stated interest rate.
B)the same as the stated interest rate.
C)less than the stated interest rate.
D)zero.
E)of no significance.

Question

Quizplus · Accepted Answer

When a bond is purchased at a price below its face value, the yield to maturity is greater than the stated interest rate because the investor not only receives the interest payments but also gains from the increase in the bond's price as it approaches its face value at maturity.

If a Bond Is Purchased at a Price Below the Face