The current price of a 10-year,$1,000 par value bond is $1,158.91.Interest on this bond is paid every six months,and the simple annual yield is 14 percent.Given these facts,what is the annual coupon rate on this bond?
A) 10%
B) 12%
C) 14%
D) 17%
E) 21%

Question

Quizplus · Accepted Answer

The bond's price is higher than its par value, indicating it is selling at a premium, which means the coupon rate is higher than the yield. The yield is 14%, so the coupon rate must be higher, making 17% the correct choice.

The Current Price of a 10-Year,$1,000 Par Value Bond Is