If current interest rates are higher than a bond's coupon rate, owners can:

Question

Quizplus · Accepted Answer

If current interest rates are higher than a bond's coupon rate, the bond's market value will decrease. However, if an owner holds the bond until maturity, they will still receive the full face value of the bond. Therefore, option A is correct. Additionally, as the bond's market value has decreased due to the increase in interest rates, its yield has increased since the coupon rate remains the same. Knowing this, investors may be more interested in buying the bond at a lower price, which corresponds to a higher yield. This is why option C is also correct. Thus, both options A and C together are the best choices.

If Current Interest Rates Are Higher Than a Bond's Coupon