Which of the following statements is most correct?
A) If a bond sells for less than par, then its yield to maturity is less than its coupon rate.
B) If a bond sells at par, then its current yield will be less than its yield to maturity.
C) Assuming that both bonds are held to maturity and are of equal risk, a bond selling for more than par with ten years to maturity will have a lower current yield and higher capital gain relative to a bond that sells at par.
D) Answers a and c are correct.
E) None of the answers above is correct.

Question

Quizplus · Accepted Answer

If a bond sells for less than par, its yield to maturity is greater than its coupon rate. If a bond sells at par, its current yield equals its yield to maturity. A bond selling for more than par will have a lower current yield but a capital loss, not a gain, relative to a bond that sells at par.

Which of the Following Statements Is Most Correct