If a security's coupon rate equals the current market interest rate on comparable securities that security will trade at par.

Question

Quizplus · Accepted Answer

When a security's coupon rate is equal to the current market interest rate for comparable securities, it means the security offers a return that is in line with the market average. Therefore, investors will not have a reason to pay more (a premium) or less (a discount) than its face value, causing it to trade at par.

If a Security's Coupon Rate Equals the Current Market Interest