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    Question

    An investor purchased a bond for ₹1,200 that pays an

    annual interest of ₹100 and matures in 5 years at face value of ₹1,000. What does this suggest about yield vs coupon?
    A Yield > coupon Correct Answer Incorrect Answer
    B Yield < coupon Correct Answer Incorrect Answer
    C Yield = coupon Correct Answer Incorrect Answer
    D Not enough data Correct Answer Incorrect Answer

    Solution

    Since the bond was purchased above face value, the effective yield is less than the coupon rate.

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