If a bond is priced at par value, then its coupon rate equals its yield to maturity.

Here's why:

a. The bond being priced at par value does not necessarily mean it has a very low level of default risk. The default risk is determined by the issuer's creditworthiness, not the bond's price.

b. If a bond is priced at par value, its coupon rate equals its yield to maturity. This is the correct answer. The yield to maturity (YTM) is the total return anticipated on a bond if it is held until it matures. When a bond is priced at par, the coupon rate (the annual interest payment divided by the par value) equals the YTM.

c. A bond priced at par value does not have to be a zero-coupon bond. A zero-coupon bond is a bond that does not pay interest during its life but is sold at a discount to its face value.

d. The bond being priced at par value does not necessarily mean the bond is quite close to maturity. The bond's price can be at par, below par (discount), or above par (premium) at any point during its life, depending on factors such as interest rates and the creditworthiness of the issuer.

Question

If a bond is priced at par value, then its coupon rate equals its yield to maturity.

Here's why:

a. The bond being priced at par value does not necessarily mean it has a very low level of default risk. The default risk is determined by the issuer's creditworthiness, not the bond's price.

b. If a bond is priced at par value, its coupon rate equals its yield to maturity. This is the correct answer. The yield to maturity (YTM) is the total return anticipated on a bond if it is held until it matures. When a bond is priced at par, the coupon rate (the annual interest payment divided by the par value) equals the YTM.

c. A bond priced at par value does not have to be a zero-coupon bond. A zero-coupon bond is a bond that does not pay interest during its life but is sold at a discount to its face value.

d. The bond being priced at par value does not necessarily mean the bond is quite close to maturity. The bond's price can be at par, below par (discount), or above par (premium) at any point during its life, depending on factors such as interest rates and the creditworthiness of the issuer.

Knowee AI · Accepted Answer

If a bond is priced at par value, then its coupon rate equals its yield to maturity.

Here's why:

a. The bond being priced at par value does not necessarily mean it has a very low level of default risk. The default risk is determined by the issuer's creditworthiness, not the bond's price.

b. If a bond is priced at par value, its coupon rate equals its yield to maturity. This is the correct answer. The yield to maturity (YTM) is the total return anticipated on a bond if it is held until it matures. When a bond is priced at par, the coupon rate (the annual interest payment divided by the par value) equals the YTM.

c. A bond priced at par value does not have to be a zero-coupon bond. A zero-coupon bond is a bond that does not pay interest during its life but is sold at a discount to its face value.

d. The bond being priced at par value does not necessarily mean the bond is quite close to maturity. The bond's price can be at par, below par (discount), or above par (premium) at any point during its life, depending on factors such as interest rates and the creditworthiness of the issuer.

If a bond is priced at par value, then:Select one:a.it has a very low level of default risk.b.its coupon rate equals its yield to maturity.c.it must be a zero-coupon bond.d.the bond is quite close to maturity.

Question

Solution

Similar Questions

Upgrade your grade with Knowee