Assume that the par value of a bond is $1,000.

Assume that the par value of a bond is $1,000. Consider a bond where the coupon rate is 9% and the current yield is 10%. Which of the following statements is true?
A. The current yield was a lot less than 9% when the bond was first issued
B. The market value of the bond is more than $1,000
C. The market value of the bond is less than $1,000
D. The current yield was a lot greater than 9% when the bond was first issued

Solution

Assume that the par value of a bond is $1,000.

Assume that the par value of a bond is $1,000. Consider a bond where the coupon rate is 9% and the current yield is 10%. Which of the following statements is true?
A. The current yield was a lot greater than 9% when the bond was first issued
B. The current yield was a lot less than 9% when the bond was first issued
 C. The market value of the bond is less than $1,000
D. The market value of the bond is more than $1,000

 

Solution