the required rate of return on a bond (rd) is greater than its coupon interest rate and will remain above that rate, then the market value of the 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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When the required rate of return on a bond is greater than its coupon interest rate, investors will demand a discount on the bond's market value to compensate for the lower interest payments. This will result in the market value being below its par value until the bond matures, at which point it will be redeemed at par value.

The Required Rate of Return on a Bond (Rd) Is