Question

If a bond's yield to maturity exceeds its coupon rate, the bond's:

d. current yield is equal to the capital gain on the maturity of the bond.

b. price must be less than its par value.

a. current yield is equal to the coupon rate.

c. maturity value is more than its face value.

Answer 1

When Bond's yield to maturity is more than the coupon rate on the bond, such bond sells at discount. So price of the bond is less than the par value of face value of the bond. These are called discount bond.

So, only option b is correct.

Price of a bond at maturity is always its face value. So option a is not correct.

Current yield on the bond is coupon/price of the bond. So we can not say any thing on current yield and capital gain. Hence, option c and d are not correct.