Which of the following statements is correct for a 10 percent coupon bond that has a current yield of 13 percent?
A)The face value of the bond has decreased
B)The bond's maturity value exceeds the bond's price
C)The bond's internal rate of return is 13 percent
D)The bond has few years remaining until maturity

Question

Quizplus · Accepted Answer

The current yield of a bond is calculated by dividing the annual interest payment by the current market price. Therefore, if the current yield is greater than the coupon rate, it means that the bond is selling at a discount. In this case, the current yield is 13%, which is greater than the coupon rate of 10%, indicating that the bond is trading at a discount. As a result, the bond's price is less than its maturity value, which is the face value of the bond. Therefore, option B is correct, and the other options are incorrect.

Which of the Following Statements Is Correct for a 10