If the required rate of return on a bond is greater than its coupon interest rate (and r_d remains above the coupon rate),the market value of that bond will always be below its par value until the bond matures,at which time its market value will equal its par value.(Accrued interest between interest payment dates should not be considered when answering this question. )

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When the required rate of return is higher than the coupon rate, investors are demanding a higher return on their investment. This means they are willing to pay less for the bond in the market, resulting in a market value below the par value. However, as the bond approaches maturity, its market value will gradually approach its par value since the bond will eventually pay the full face value to the bondholder.

If the Required Rate of Return on a Bond Is