Asked by Veronica Krall on Jul 06, 2024
Verified
The yield to maturity will be greater than the coupon rate when a bond is selling at a premium.
Yield To Maturity
The total return anticipated on a bond if the bond is held until its maturity date, taking into account both interest payments and capital gains or losses.
Coupon Rate
The interest rate on a bond that the issuer promises to pay to the bondholder until maturity.
Premium
The amount by which the price of something, especially a financial security, exceeds its principal or face value.
- Understand the connection between market interest rates, bond prices, and coupon rates.
Verified Answer
RH
Rahat HashmiJul 11, 2024
Final Answer :
False
Explanation :
The yield to maturity will be less than the coupon rate when a bond is selling at a premium because the investor pays more than the face value of the bond, leading to a lower yield compared to the stated coupon rate.
Learning Objectives
- Understand the connection between market interest rates, bond prices, and coupon rates.