All else constant, a coupon bond that is selling at a discount, must have: a coupon rate that is equal to the yield to maturity. a yield to maturity that is less than the coupon rate. semiannual interest payments. a coupon rate that is less than the yield to maturity.

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Business

Brandon Dennis

31 March, 22:28

All else constant, a coupon bond that is selling at a discount, must have: a coupon rate that is equal to the yield to maturity. a yield to maturity that is less than the coupon rate. semiannual interest payments. a coupon rate that is less than the yield to maturity.

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Sariah · Answer 1

All else constant, a coupon bond that is selling at a discount, must have a coupon rate that is less than the yield to maturity.

Explanation:

In a scenario when a bond is bought at par, the coupon rate and d the yield to maturity remains equal. The reason behind this behavior is the preliminary investment is offset completely by bond repayment at maturity, which means the fixed coupon payments will only be counted as profit.

When the bond is bought at a discount, in that case, the bond's coupon rate stays lower as against the yield to maturity.