New Enroll in RBI Grade B New Batch - Starts on May 21

    Question

    When the coupon of a bond is less than the market risk

    free interest rate, it will trade at
    A Par Correct Answer Incorrect Answer
    B Discount Correct Answer Incorrect Answer
    C Premium Correct Answer Incorrect Answer
    D Par or discount Correct Answer Incorrect Answer
    E Par or premium Correct Answer Incorrect Answer

    Solution

    When a bond has a YTM > than its coupon rate, it sells at a discount from its face value. When a bond has a YTM = to the coupon rate, the market price equals the face value. When a bond has a YTM < the coupon rate, the bond sells at a premium over face value.

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