A Government of Canada bond that was issued with a term to maturity of 15 years ago and is expected to mature in 5 years has a coupon of 5%.If other Government of Canada bonds that are scheduled to mature in 5 years are currently paying a coupon of 5%,what can reasonably expect that these Government of Canada bonds are currently priced at?

Question

Quizplus · Accepted Answer

Since the bond in question has a coupon rate of 5%, the market rate of other bonds with the same maturity and coupon rate is also 5%. Therefore, the bond can be priced at par value as there is no premium or discount.

A Government of Canada Bond That Was Issued with a Term