Which of the following statements is CORRECT?
A) if a coupon bond is selling at a discount, its price will continue to decline until it reaches its par value at maturity.
B) if interest rates increase, the price of a 10-year coupon bond will decline by a greater percentage than the price of a 10-year zero coupon bond.
C) if a bond's yield to maturity exceeds its annual coupon, then the bond will trade at a premium.
D) if a coupon bond is selling at a premium, its current yield equals its yield to maturity.
E) if a coupon bond is selling at par, its current yield equals its yield to maturity.

Question

Quizplus · Accepted Answer

If a coupon bond is selling at par, it means that its price is equal to its face value, and therefore its current yield (the annual coupon payment divided by the current market price) would be the same as its yield to maturity (the expected total return if held until maturity).

Which of the Following Statements Is CORRECT