If a bond is selling at par value,which of the following statements is correct?
A) The current yield must equal the coupon rate.
B) The current yield must equal the yield to maturity.
C) Both of these statements are correct.
D) None of the statements are correct.

Question

Quizplus · Accepted Answer

When a bond is selling at par value, it means that its current price is equal to its face value or principal amount. In this case, the current yield, which is the annual interest payment divided by the current price, must be equal to the coupon rate, which is the annual interest payment divided by the face value. Additionally, the yield to maturity, which is the estimated rate of return if the bond is held until maturity, will also be equal to the coupon rate and the current yield because there is no premium or discount involved. Therefore, both statements A and B are correct.

If a Bond Is Selling at Par Value,which of the Following