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If You Purchase a 5 Year Bond with a Face

Question 16

Multiple Choice

If you purchase a 5 year bond with a face value of $1,000, an annual coupon rate of 8%, and a YTM of 10% (the market rate for similar bonds) , which of the following statements is true?


A) The bond will be selling at a discount at a price less than $1,000 (its face value) , since the coupon rate < YTM.
B) The bond will be selling at its par (face) value of $1,000.
C) The bond will be selling at a premium at a price greater than $1,000 (its face value) , since the coupon rate < YTM.
D) None of the above.

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