199k views
3 votes
The yield to maturity will be greater than the coupon rate when a bond is selling at a premium. true/false

User Kevin C
by
4.5k points

1 Answer

5 votes

Answer: False

Step-by-step explanation:

When a bond is selling at a price that is above the Par value, it is said that the bond is selling at a Premium. This happens when the Coupon rate is higher than the Yield to Maturity.

The logic here is that the bond will be paying out more as coupon payments than the current yields in the market so it is a more attractive option that will command a higher price.

User Anton Holovin
by
5.8k points