Which one of the following statements applies to a par value bond?

Question

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A par value bond is one in which the bond is issued and redeemed at its face value, which is typically $1,000. Therefore, the current yield, coupon rate, and yield to maturity will all be equal because the bond is trading at par value. Choice A is incorrect because the current yield will be equal to the coupon rate for a par value bond. Choice B is incorrect because the yield to maturity will be equal to the coupon rate for a par value bond, not the risk-free rate. Choice C is incorrect because the par value should be equal to the face value at which the bond was issued. Choice E is incorrect because the dirty price, which includes accrued interest, will generally be higher than the clean price, which does not include accrued interest.

Which One of the Following Statements Applies to a Par