Which of the following is correct for a bond investor whose bond offers a 5% current yield and an 8% 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 bond must be a Treasury Inflation-Protected Security.

Question

Quizplus · Accepted Answer

A bond with a current yield of 5% and a yield to maturity of 8% is selling at a discount to par value. This means that the bond is trading at a price lower than its face value, resulting in a higher yield to maturity.

Which of the Following Is Correct for a Bond Investor