Question
the s company has a bond outstanding with a face value of $1000 that reaches maturity in 8 years. the bond certificate indicates that the states coupon rate is 9.5% and that the coupon payments are to be made semiannually. assuming the appropriate YTM on the S company bond is 6.8%, then this bond will trade at?

par
a premium
a discount
none of the above
0 0
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Answer #1

If the market yield is less than what the issuer is offering(i.e., coupon rate), then the issuer will charge more for the bond, hence, it will issue at premium.

So, 2nd option is correct.

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