Which of the following presents the correct relationship? As the coupon rate of a bond increases,the bond's:
A) face value increases.
B) current price decreases.
C) interest payments increase.
D) maturity date is extended.

Question

Quizplus · Accepted Answer

The coupon rate is the interest rate that the bond issuer pays to the bondholders. As the coupon rate increases, the interest payments increase, which means that bondholders receive more income from holding the bond. However, this also means that the bond becomes less attractive to investors who are looking for a higher yield, and this can cause the bond's current price to decrease. The face value and maturity date of the bond are not directly affected by changes in the coupon rate.

Which of the Following Presents the Correct Relationship? as the Coupon