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If coupon rate is more than current rate of interest then...

This question belongs to Commerce Financial Management
Financial Management
?

If coupon rate is more than current rate of interest then bond will be sold

Answer & Solution
Correct Answer: Option A
A bond's interest rate is related to the current prevailing interest rates and the perceived risk of the issuer. When interest rates are less than the coupon rate, the bond can be sold at a premium (higher than the face value). When current interest rates are greater than a bond's coupon rate, the bond will sell below its face value at a discount.
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1 Comment
Muhammad Ilyas
Muhammad Ilyas 6 years ago
A is right answer.

Explanation:
When current interest rates are greater than a bond's coupon rate, the bond will sell below its face value at a discount. When interest rates are less than the coupon rate, the bond can be sold at a premium--higher than the face value.
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