A discount bond that pays interest semiannually will ______.
I.have a lower price than an equivalent annual payment bond
II.have a higher EAR than an equivalent annual payment bond
III.sell for less than its conversion value

Question

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A discount bond that pays interest semiannually will have a lower price than an equivalent annual payment bond because the more frequent compounding results in a lower present value. It will also have a higher effective annual rate (EAR) than an equivalent annual payment bond due to the effect of compounding interest more frequently. However, the statement about selling for less than its conversion value is not necessarily true for all discount bonds.

A Discount Bond That Pays Interest Semiannually Will ______