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A bond that was was issued several years ago is being sold in the secondary market....

A bond that was was issued several years ago is being sold in the secondary market. It carries an interest rate of 10 percent when bonds of equivalent risk are being issued today with an interest rate of 8 percent. This bond will sell at a:

A. Premium

B. Can not be determined from the information provided

C. Discount

D. Par value

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Answer #1

Premium

As Current Yield to Maturity < Coupon Rate of the bond, so bond will trade at premium to par value.

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