If a bond is selling at par value, which of the following statements is correct?
A)The current yield must equal the coupon rate.
B)The current yield must equal the yield to maturity.
C)Both of these statements are correct.
D)None of these statements is correct.

Question

Quizplus · Accepted Answer

When a bond is selling at par value, its coupon rate (the interest paid annually on the bond) is equal to the yield to maturity (the total return an investor receives if the bond is held until maturity). This also means that the current yield (the interest paid annually divided by the market price) is also equal to the coupon rate and yield to maturity. Therefore, both statements A and B are correct.

If a Bond Is Selling at Par Value, Which of the Following