When the coupon rate of a bond is below the prevailing rate of return,the bond is sold at

Question

Quizplus · Accepted Answer

When the coupon rate of a bond is below the prevailing rate of return, it is considered less desirable than other available investments. To attract buyers, the bond must sell at a discounted price, which means that it will have a lower market value than its face value. The discounted price compensates for the lower coupon rate and generates a higher effective yield on the investment. Therefore, the correct choice is B, discounted price.

When the Coupon Rate of a Bond Is Below the Prevailing