If market interest rate falls below coupon rate then bond will be sold__________?
Correct answer: B. Above its par value
- A. Below its par value
- B. Above its par value
- C. Equal to return rate
- D. Seasoned price
Explanation
When the market rate falls below the coupon rate, the bond’s fixed payments are more attractive than newly issued alternatives, so investors bid its price above par value. Bond prices and market interest rates move in opposite directions.
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