A bond with a coupon rate of 10%,a market price of $800,a maturity of 10 years,and a face value of $1,000 has a yield to maturity of 16.2%.

Question

Quizplus · Accepted Answer

If the bond has a yield to maturity of 16.2%, its market value should be lower than its face value to compensate for the higher return. In this case, the market price of $800 is higher than the discounted value of the bond's expected cash flows, which leads to a yield to maturity lower than 16.2%. Therefore, the statement is false.

A Bond with a Coupon Rate of 10%,a Market Price