Which of the following is correct when a bond investor's rate of return for a particular period exceeds the bond's coupon rate?
A)The bond increased in price during the period
B)The bond decreased in price during the period
C)The coupon payment increased during the period
D)It is not possible for a bondholder's rate of return to exceed the bond's coupon rate

Question

Quizplus · Accepted Answer

When a bond investor's rate of return for a particular period exceeds the bond's coupon rate, it means that the investor received more income than expected from the bond. This occurs when the bond's price increases during the period. Therefore, choice A is correct. Choice B is incorrect because if the bond decreased in price, the investor would receive less income than expected, resulting in a lower rate of return than the coupon rate. Choice C is also incorrect as the coupon payment is a fixed amount stated in the bond's contract and does not increase or decrease. Choice D is incorrect because it is possible for a bondholder's rate of return to exceed the coupon rate if the bond's price increases during the period.

Which of the Following Is Correct When a Bond Investor's