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12 December, 10:43

Which one of the following statements is true? Question 4 options: A) A premium bond has a current yield that exceeds the bond's coupon rate. B) The yield to maturity on a premium bond exceeds the bond's coupon rate. C) The current yield on a par value bond will exceed the bond's yield to maturity. D) The current yield on a premium bond is equal to the bond's coupon rate. E) A discount bond has a coupon rate that is less than the bond's yield to maturity.

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  1. 12 December, 10:54
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    E)

    A discount bond has a coupon rate that is less than the bond's yield to maturity.

    Explanation:

    Premium bonds: Coupon rate > Current yield > Yield to maturity

    Discount bonds: Coupon rate < Current yield < Yield to maturity

    Par value bonds: Coupon rate = Current yield = Yield to maturity
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