When a bond is bought at a discount price below its par value,the current yield will be higher than the coupon rate.

Question

Quizplus · Accepted Answer

When a bond is bought at a discount price, the investor pays less than the face value of the bond. As a result, the yield to maturity (YTM) of the bond is higher than the coupon rate. This is because the investor receives interest payments based on the face value of the bond but pays a lower price for it. Therefore, the current yield (annual interest payment divided by the bond price) will be higher than the coupon rate.

When a Bond Is Bought at a Discount Price Below