If the required rate of return on a bond (rd) is greater than its coupon interest rate and will remain above that rate, then the market value of the bond will always be below its par value until the bond matures, at which time its market value will equal its par value. (Accrued interest between interest payment dates should not be considered when answering this question.)

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This is because when the required rate of return on a bond is higher than its coupon interest rate, it implies that the bond is less attractive to investors, as other investments can provide higher returns for the same level of risk. As a result, the bond's price will decrease, leading to a market value below its par value. However, as the bond approaches maturity, the impact of the required rate of return on the bond's price decreases, and the market value of the bond will converge to its par value.

If the Required Rate of Return on a Bond (Rd)