Bond X and Bond Y are both issued by the same company.Each of the bonds has a face value of $100,000 and each matures in 10 years.Bond X pays 8% interest while Bond Y pays 9% interest.The current market rate of interest is 8%.Which of the following is correct?

Question

Quizplus · Accepted Answer

When the market interest rate is higher than the coupon rate, the bond will sell at a discount. Therefore, Bond X, with a lower coupon rate of 8%, will sell at a lower price than Bond Y, which has a coupon rate of 9%. So, Bond Y will sell for more than Bond X.

Bond X and Bond Y Are Both Issued by the Same