Answer-Which of the following statements about bonds is true?

Explanation When a bonds coupon rate equals the required market return, there is no premium or discount, so the price equals its par face value. This holds regardless of maturity, assuming no call or put features.

Question

Which of the following statements about bonds is true?

A If the coupon rate equals the required return, the bond’s price equals its face value.

B For a discount bond, the coupon rate is greater than the required return.

C The yield to maturity (YTM) is always equal to the coupon rate at issuance.

D When interest rates rise, the prices of existing bonds increase.

E Callable bonds have lower yields compared to similar non-callable bonds.

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Which of the following statements about bonds is true?

Solution