Question

The yield to maturity on a bond issued at premium is: 1) equal to both the coupon rate and the current yield. 2) less than the current yield but greater than the coupon rate. 3) less than the coupon rate. 0 4) equal to the current yield but greater than the coupon rate. 5) greater than both the current yield and the coupon rate.

Answer 1

The yields to maturity on a bond issued at premium is

3) lees than the coupon rate because investors are agreeing to pay a premium over the face value only of the coupon payment rate is higher than the market rate currently being offered in the Market.

1) is incorrect because in this situation bond will trade at par

2,4,5 are incorrect because of the reason justified above

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