Bonds issued by BB&C Communications that have a coupon rate of interest equal to 10.65 percent currently have a yield to maturity (YTM) equal to 15.25 percent. Based on this information, it is understood that BB&C's bonds must currently be selling at _____ in the financial markets.

Question

Quizplus · Accepted Answer

The bonds are selling at a discount because the yield to maturity (15.25 percent) is higher than the coupon rate (10.65 percent). This indicates that the bonds are being sold for less than their face value to compensate for the lower interest payments compared to the current market rate.

Bonds Issued by BB&C Communications That Have a Coupon Rate