Question
Indicate which one of following statements is true for a coupon bond: A) When the price of a bond is above its par value, the
Indicate which one of following statements is true for a coupon bond:
A) When the price of a bond is above its par value, the yield to maturity is greater than the coupon rate.
B) The yield to maturity and the price of a coupon bond are positively related.
C) When the price of a coupon bond equals its face value, the yield to maturity equals the coupon rate.
D) When the price of a bond is below its par value, the yield to maturity is less than the coupon rate.
Support your answer with the use of a formula and explain in detail all the assumptions you make and all the components you use. (You may also want to use a yield calculator to verify you answer).
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