If a bond's price is at a premium to face value,it has a:
A) yield below its coupon rate of interest.
B) yield equal to its coupon rate of interest.
C) yield above its coupon rate.
D) decreased risk premium.

Question

Quizplus · Accepted Answer

When a bond is priced at a premium to face value, it means that its market price is higher than the face value or the par value of the bond. This indicates that the bond's yield is lower than its coupon rate of interest. This is because the bond's fixed interest payments are lower in comparison to its higher market price, resulting in a lower yield.

If a Bond's Price Is at a Premium to Face