If the yield to maturity on a bond is greater than the coupon rate, you can assume
A) interest rates have decreased.
B) the sales price is below par.
C) the sales price is above par.
D) risk premiums have decreased.

Question

Quizplus · Accepted Answer

Yield to maturity measures the total return anticipated on a bond if it is held until it matures. If the yield to maturity on a bond is greater than the coupon rate, it means that the bond is selling at a discount, or below par. This is because the market is demanding a higher yield to compensate for the lower coupon rate. Therefore, the best choice is B.

If the Yield to Maturity on a Bond Is Greater