Ask Question
19 May, 17:51

A company releases a five-year bond with a face value of $1000 and coupons paid semiannually. If market interest rates imply a YTM of 10 %, which of the following coupon rates will cause the bond to be issued at a premium?

A) 8%

B) 12%

C) 7%

D) 10%

+3
Answers (1)
  1. 19 May, 21:16
    0
    B) 12%

    Explanation:

    As we know that the coupon rate and YTM is equal if it is sold at par. If the coupon rate is less than the YTM than the bond is sold at discount and if the coupon rate is more than the YTM than the bond is sold at premium

    Since the question is asking about the coupon rate if the bond is sold at premium so the coupon rate would be higher than the YTM.

    So, the coupon rate would be 12%
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “A company releases a five-year bond with a face value of $1000 and coupons paid semiannually. If market interest rates imply a YTM of 10 %, ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers