If the price of a corporate bond rises above its face value, this means that the yield has _____ and the bond's risk level has _____.

Question

Quizplus · Accepted Answer

When the price of a corporate bond rises above its face value, its yield (interest rate relative to the price) falls because the fixed interest payments become a smaller percentage of the bond's higher price. The bond's risk level is perceived to have fallen, as the price increase typically reflects improved issuer creditworthiness or a decrease in market interest rates, making existing bonds more valuable.

If the Price of a Corporate Bond Rises Above Its