Asked by marbi mendoza on Jul 01, 2024
Verified
Any regular coupon bond of any maturity will sell for its face value if the coupon rate is the same as the market rate of interest.
Coupon Rate
The annual interest rate paid by a bond expressed as a percentage of the face value.
Market Rate
The current interest rate offered in the market for securities or loans.
- Acknowledge the link between bond prices, market interest rates, and coupon rates.
Verified Answer
CP
Carolina Pinzón7 days ago
Final Answer :
True
Explanation :
When the coupon rate on a bond equals the market interest rate, the bond will sell at its face value because the present value of its cash flows (interest payments and principal repayment) equals its nominal value.
Learning Objectives
- Acknowledge the link between bond prices, market interest rates, and coupon rates.