Final answer:
The false statement is A, which claims that the clean price of a bond is adjusted for accrued interest; in reality, the clean price does not include accrued interest.
Step-by-step explanation:
The question pertains to the characteristics of bond pricing and their relation to yield to maturity (YTM) and coupon rates.
From the options provided in the question, the false statement is: A. The clean price of a bond is adjusted for accrued interest. This statement is false because the clean price of a bond does not include accrued interest; instead, it is the dirty price (also known as the invoice price) that includes accrued interest. The clean price is the price of the bond excluding accrued interest.
Statement B is true as when the YTM exceeds the coupon rate, the bond's price will be less than its face value, not greater, due to the present value being inversely related to the interest rate. Statement C is correct because a bond trades at par value when its coupon rate matches the market interest rate, which is the YTM. Statement D is also true, after a coupon is paid, the bond's price will drop by the amount of the coupon to reflect the fact that the investor will not receive that particular coupon payment again.