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12 March, 14:57

If a bond with face value of $1,000 and a coupon rate of 8% is selling at a price of $970, is the bond's yield to maturity more or less than 8%?

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  1. 12 March, 15:14
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    The bond's yield to maturity will be more than 8%.

    Explanation:

    The face value of the bond is $1,000.

    The coupon rate is 8%.

    The selling price is given at $970.

    The selling price is lower than the face value. This indicates that this a discounted bond. The yield to maturity for a discounted bond is higher than the coupon rate.

    So, the bond's yield to maturity will be more than 8%.
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