Question

The prices of several bonds with face values of

$ 1 comma 000$1,000

are summarized in the following​ table:

Bond	A	B	C	D
Price	$ 978.18$978.18	$ 1 comma 043.56$1,043.56	$ 1 comma 150.29$1,150.29	$ 1 comma 000.00$1,000.00

For each​ bond, state whether it trades at a​ discount, at​ par, or at a premium.

Bond A is selling at

▼

a discount

par

a premium

. ​(Select from the​ drop-down menu.)

Answer 1

a)

Bond A is selling at DISCOUNT

A bond is said to be trading at disount when price is less than face value. Here the price of 978.18 is less than face value of $1000

b)

Bond B is selling at PREMIUM

A bond is said to be trading at premium when price is more than face value. Here the price of 1,043.56 is more than face value of $1000.

c)

Bond C is selling at PREMIUM

A bond is said to be trading at premium when price is more than face value. Here the price of 1,150.29 is more than face value of $1000.

d)

Bond D is selling at PAR

A bond is said to be trading at par when price is equal to face value. Here the price of 1,000 is more than face value of $1000.