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    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. Correct Answer Incorrect Answer
    B For a discount bond, the coupon rate is greater than the required return. Correct Answer Incorrect Answer
    C The yield to maturity (YTM) is always equal to the coupon rate at issuance. Correct Answer Incorrect Answer
    D When interest rates rise, the prices of existing bonds increase. Correct Answer Incorrect Answer
    E Callable bonds have lower yields compared to similar non-callable bonds. Correct Answer Incorrect Answer

    Solution

    Explanation When a bond's 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.

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