The closer the yield to maturity on a bond to the stated rate, the closer to par the bond will trade.

Question

Quizplus · Accepted Answer

When the yield to maturity on a bond is close to the stated rate, it means that the bond is trading at a price closer to its face value (par) because there is little difference between the coupon rate and the market interest rates. As a result, investors are willing to pay a higher price for the bond, which brings the price closer to par value. Conversely, if the yield to maturity is significantly different from the stated rate, the bond will trade at a price further away from par value.

The Closer the Yield to Maturity on a Bond to the Stated