If the required rate of return on a bond (r_d) 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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When the required rate of return on a bond is greater than its coupon interest rate, investors will not be willing to pay the full par value for the bond because they can get a better return elsewhere. Therefore, the bond's market value will be below par value. As the bond approaches maturity, the market value will gradually increase and eventually reach par value at maturity.

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

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