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Abraham found a $1,000 face value bond that belonged to his father. He checked The Wall Street Journal and found the bond was currently selling for $1,220. This bond sells at a:_____
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Abraham found a $1,000 face value bond that belonged to his father. He checked The Wall Street Journal and found the bond was currently selling for $1,220. This bond sells at a:_____

User Matt Donnan
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Answer:

Premium

Step-by-step explanation:

Whenever a bond sells for more than its face value, it sells at a premium, which means that the investors are willing to pay more for the bond than its face value. This happens when the coupon payment percentage on the bond are higher than the yield to maturity of the bond, because the investors required return is the yield to maturity, when the bond pays more than the required return the investors are willing to pay more for the bond.

User Johlo
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