Question

A bond with a face value of $1,000 has annual coupon payments of $80 and was issued 15 years ago. The bond currently sells for $1,000 and has 10 years left to maturity. This bond's _______________ must be 8%.I.yield to maturityII.current yieldIII.coupon rate

Answer 1

Answer:

I.yield to maturity

Explanation:

When a bond's market price is the same as its face value, it means that the bond's coupon rate is identical to the market's interest rate (yield to maturity). When the bond's coupon rate is higher than the market value, it will sell at a premium, but when the coupon rate is lower than the market rate, it will sell at a discount.