If a bond's price is lower than the principal amount,its yield to maturity will be ________ the coupon rate.

Question

Quizplus · Accepted Answer

If a bond's price is lower than the principal amount, it indicates that the bond is trading at a discount. The yield to maturity of a bond takes into account the annual coupon payments and the principal amount received at maturity. A discount bond with a lower price will have a higher yield to maturity than the coupon rate, which is the fixed rate of interest paid annually on the bond. Therefore, the yield to maturity will be more than the coupon rate in this case.

If a Bond's Price Is Lower Than the Principal Amount,its