If the yield to maturity of all of the following bonds is 6%,which trades at the greatest discount per $100 face value?
A)a bond with a $10,000 face value,four years to maturity and 6.2% semi-annual coupon payments
B)a bond with a $500 face value,ten years to maturity and 5.2% annual coupon payments
C)a bond with a $5000 face value,seven years to maturity and 5.5% annual coupon payments
D)a bond with a $1000 face value,five years to maturity and 6.3% annual coupon payments
E)a bond with a $100 face value,3 years to maturity and 6.0% annual coupon payments

Question

Quizplus · Accepted Answer

The bond that trades at the greatest discount is the one with the lowest coupon rate relative to its yield to maturity, longest time to maturity, and all else being equal. Among the options, the bond in B has the lowest coupon rate (5.2% annual) compared to the yield to maturity (6%), and it has the longest time to maturity (10 years), which means it will trade at the greatest discount per $100 face value.

If the Yield to Maturity of All of the Following