How can a bond with a coupon rate of 10% and being sold at par offer...
How can a bond with a coupon rate of 10% and being sold at par offer the same return to the investor as a bond paying interest of 6% per year and selling below par, assuming that both are held until maturity?
Homework Answers
If Bond having coupon rate 10% is selling at par means, It has same discount Rate.
If anothe bind is having coupon rate of 6% and discount rate is 10% it will be sold at less than par value.
If Coupon Rate > Discount Rate - Bind will be sold at premium
If Coupon Rate = Discount Rate - Bind will be sold at Par
If Coupon Rate < Discount Rate - Bind will be sold at discount
Pls commnent, if any further assistance is required.
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How can a bond with a coupon rate of 10% and being sold at par
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