If a bond is selling at a discount,which of the following statements is correct?
A) The current yield must be greater than the coupon rate.
B) The coupon rate must be greater than the yield to maturity.
C) The bond must have a low bond rating.
D) All of the statements are correct.

Question

Quizplus · Accepted Answer

When a bond is selling at a discount, it means the market interest rates are higher than the coupon rate of the bond. Therefore, the current yield (which is calculated by dividing the annual interest payment by the market price) must be greater than the coupon rate in order to compensate investors for the lower price they paid for the bond.

If a Bond Is Selling at a Discount,which of the Following