Which of the following is correct for a bond investor whose bond offers a 5 percent current yield and an 8 percent yield to maturity?
A)The bond is selling at a discount to par value
B)The bond has a high default premium
C)The promised yield is not likely to materialize
D)The security must be a Canada bond

Question

Quizplus · Accepted Answer

A bond investor whose bond offers a 5 percent current yield and an 8 percent yield to maturity indicates that the bond is selling at a discount to par value. This is because the bond's yield to maturity is higher than its current yield, indicating that the investor will receive a higher rate of return if they hold the bond until maturity.

Which of the Following Is Correct for a Bond Investor