Omega Software Corporation's bond with a face value of $1,000 is currently selling at a premium in the financial markets. If the bond's yield to maturity is 11.5 percent, then the bond's:
A)coupon rate of interest must be less than 11.5 percent.
B)coupon rate of interest must be greater than 11.5 percent.
C)coupon rate of interest must be equal to 11.5 percent.
D)maturity value must be greater than $1,000.
E)maturity value must be less than $1,000.

Question

Quizplus · Accepted Answer

Bonds sell at a premium when the coupon rate of interest is higher than the yield to maturity. This means the bond is offering interest payments that are more attractive than the current market rates, hence the premium price.

Omega Software Corporation's Bond with a Face Value of $1,000