Which of the following statements is correct for a 10% coupon bond that has a current yield of 7%?
A) The face value of the bond has decreased.
B) The bond's maturity value exceeds the bond's price.
C) The bond's internal rate of return is 7%.
D) The bond's market value is higher than its face value.

Question

Quizplus · Accepted Answer

A coupon bond pays interest based on its face value, which is fixed at the time of issuance. Therefore, the face value of the bond remains the same, irrespective of its current yield. As the current yield is lower than the coupon rate, it indicates that the bond's market value has increased. Hence, the market value of the bond is now higher than its face value. Therefore, option D is correct. The bond's maturity value and internal rate of return are not provided, hence options B and C cannot be chosen.

Which of the Following Statements Is Correct for a 10