If an investor purchases a bond when its current yield is higher than the coupon rate,then the bond's price will be expected to:
A) decline over time, reaching par value at maturity.
B) increase over time, reaching par value at maturity.
C) be less than the face value at maturity.
D) exceed the face value at maturity.

Question

Quizplus · Accepted Answer

When a bond's current yield is higher than its coupon rate, it means the bond is selling at a discount. As the bond approaches maturity, its price will increase to reach its face value (par value).

If an Investor Purchases a Bond When Its Current Yield