A corporate bond with a face value of $1,000 is currently selling at par,and pays an 8% yield to maturity.Which of the following statements concerning this bond is true?

Question

Quizplus · Accepted Answer

Since the bond is selling at par, its market price is equal to its face value of $1,000 (A is correct). The bond pays an 8% annual yield on its face value, which is $80 per year; since bond coupons are typically paid semi-annually, this results in two payments of $40 each, making (B) correct. The current yield, which is the annual interest payment divided by the current market price, is also 8% because the bond is selling at par, making (C) correct. Therefore, all of the statements A, B, and C are correct, which means D is the correct choice.

A Corporate Bond with a Face Value of $1,000 Is