Which of the following statements is (are) true?
(I) A bond has level coupons payable at j₂ = 5% and is redeemable C) at par.If this bond is purchased at a price (P) based on j₂ = 6.5%,then P > C.(II) The full (or dirty) price of a bond is always greater than the market (or clean) price of the bond.

Question

Quizplus · Accepted Answer

(I) If a bond is purchased at a yield higher than its coupon rate, it is bought at a discount, so P < C. (II) The full price includes accrued interest, so it is typically greater than the clean price, but not always, as it depends on the timing of the coupon payments.

Which of the Following Statements Is (Are)true