Final answer:
The statement is false because the discount rate can be determined and is equal to the bond's coupon rate of 5.6%, provided the term structure is flat and the bond sells at par value.
Step-by-step explanation:
The statement that the discount rate cannot be determined for a coupon bond selling at par value with a flat term structure is false. If a coupon bond is selling at par value, its coupon rate must be equal to the market interest rate or discount rate. Since the coupon bond in question has a coupon rate of 5.6% and pays interest semi-annually, and is selling at par, we can infer that the current market discount rate for bonds of this maturity is also 5.6%.
Bonds are debt securities under which the issuer owes the holders a debt and is obligated to pay them interest (the coupon) and to repay the debt at a later date (maturity date). The present value of a bond is computed by taking into account its face value, interest rate, and maturity date, along with market interest rates. The present value is the most a buyer would be willing to pay, and it fluctuates with changes in the prevailing market discount rate.
Therefore, the coupon rate of the bond gives us direct information about the discount rate, provided the term structure is flat and the bond is selling at par value. This aligns with basic principles of bond valuation where a bond's coupon rate at par value should be equivalent to the market discount rate, which in this instance can be determined to be 5.6%.