You own a bond that has an 8 percent coupon and matures 8 years from now. You purchased this bond at par value when it was originally issued. If the current market rate for this type and quality of bond is 8.25 percent, then you would expect

Question

Rohan Sharp

Business

23 December, 07:49

You own a bond that has an 8 percent coupon and matures 8 years from now. You purchased this bond at par value when it was originally issued. If the current market rate for this type and quality of bond is 8.25 percent, then you would expect

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Answers (1)

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Ellen Perkins · Answer 1

C) to realize a capital loss if you sold the bond at the market price today.

Explanation:

Your bond will sell at a discount since the market rate is higher than the bond's coupon rate. When a bond sells at a discount its market price is lower than its face value. Since you purchased the bond at its face value, and you sell right now, you will receive less money than what you paid for it.