Bonds with the same level of risk, the same maturity, and the same coupon rate will always sell for the same price whether the interest is paid annually, semi-annually or quarterly.

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Quizplus · Accepted Answer

Bonds with the same level of risk, the same maturity, and the same coupon rate will not always sell for the same price if interest payments are made at different frequencies. This is because the time value of money and compounding effects differ based on the payment frequency. If interest is paid semi-annually or quarterly, the bond will have more frequent cash flows and therefore a higher present value than if interest is paid annually. As a result, the bond with more frequent payments will sell at a higher price than the bond with less frequent payments.

Bonds with the Same Level of Risk, the Same Maturity