A bond's value is the same as its principal amount when the coupon rate is:

Question

Quizplus · Accepted Answer

When the coupon rate is the same as the required rate of return, the bond's value is the same as its principal amount, which is also known as the par value or face value. This is because investors are satisfied with the return they are receiving on their investment and do not require any additional compensation for the risk they are taking on. If the coupon rate is higher than the required rate of return, the bond's value will be higher than its principal amount, and if the coupon rate is lower than the required rate of return, the bond's value will be lower than its principal amount. If the coupon rate is lower than the inflation rate, the bond's real return will be negative, and the bond's value will decrease accordingly.

A Bond's Value Is the Same as Its Principal Amount