What causes bonds to sell for a premium compared to face value?
A) The bonds have high ratings.
B) The bonds have a long period until maturity.
C) The bonds have a higher than market coupon rate.
D) The bonds are of speculative grade.

Question

Quizplus · Accepted Answer

Bonds with a coupon rate higher than the prevailing market interest rates are attractive to investors, causing them to be willing to pay a premium over the face value to purchase these bonds. The higher the coupon rate, the greater the premium that investors will be willing to pay. High credit ratings (choice A) and longer maturity periods (choice B) may also make bonds more attractive to investors, but they do not directly cause the bonds to sell at a premium. Speculative grade bonds (choice D) are considered to be high-risk investments and are less likely to sell at a premium.

What Causes Bonds to Sell for a Premium Compared to Face