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    • Question

      A bond with a face value of ₹1,000, 5% annual coupon,

      and maturity of 5 years is sold at ₹950. What does this price suggest?
      A Coupon rate equals market rate Correct Answer Incorrect Answer
      B Bond is undervalued Correct Answer Incorrect Answer
      C Bond yields more than 5% Correct Answer Incorrect Answer
      D Bond has call protection Correct Answer Incorrect Answer

      Solution

      When bond price < face value, yield to maturity > coupon rate.

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