If coupon rate is equal to going rate of interest, then bond will be sold________?
Correct answer: D. At par value
- A. Seasoned par value
- B. Below its par value
- C. More than its par value
- D. At par value
Explanation
When the coupon rate equals the prevailing market interest rate, the bond offers exactly the return investors require and therefore sells at its face, or par, value. A higher market rate would push it below par, while a lower rate would push it above par.
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