A bond which has a yield to maturity greater than its coupon interest rate will sell for a price
A) below par.
B) at par.
C) above par.
D) what is equal to the face value of the bond plus the value of all interest payments.

Question

Quizplus · Accepted Answer

When a bond has a yield to maturity greater than its coupon interest rate, it means that the market interest rates have risen since the bond was issued. As a result, investors will demand a higher yield on the bond to compensate for the lower interest payments relative to current market rates. This will cause the bond price to fall below its par value, making choice A the correct answer.

A Bond Which Has a Yield to Maturity Greater Than