If the required rate of return on a bond is greater than its coupon interest rate (and rd remains above the coupon rate), the market value of that bond will always be below its par value until the bond matures, at which time its market value will equal its par value. (Accrued interest between interest payment dates should not be considered when answering this question.)

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This is known as a discount bond, where the bond is sold at a price below its par value. As time passes and the bond approaches maturity, the price of the bond will increase and eventually reach its par value at maturity.

If the Required Rate of Return on a Bond Is