When the interest rate on a bond and its yield to maturity are equal, the bond will trade at par value or equal to its principal amount.

Question

Quizplus · Accepted Answer

When the interest rate (coupon rate) on a bond and its yield to maturity (the total return anticipated on a bond if it is held until it matures) are equal, the bond will trade at par value or equal to its principal amount. This is because the yield to maturity reflects the market's expectation of the bond's return, and if the coupon rate already matches that expectation, the bond will trade at its face value.

When the Interest Rate on a Bond and Its Yield