Question

A U.S. corporate issued bond is currently trading for $932. Which of the following statements are either likely or certainly true? (choose all that apply):

1) The bond's coupon rate is higher than its YTM.

2) The bond's coupon rate is lower than its YTM.

3) The bond's face value is $1000.

4) The bond pays interest semiannually.

5) This bond would be considered a discount bond at this time.

6) This bond would be considered a junk bond at this time.

7) This bond has just been issued.

Answer 1

The following statements are either likely or certainly true:

Sl. no. 2: The bond's coupon rate is lower than its YTM. (If the both coupon rate and YTM are equal, the bond will sell at par. If the YTM is higher than coupon rate, price will be less than face value and vice versa).

Sl. no. 3: The bond's face value is $1,000.

Sl. no. 5: This bond would be considered a discount bond at this time. (Because, price is lower than face value)

Other statements cannot be verified and ascertained with the information available.