Coupon Rates, Yield Rates, and Bond Issuance Prices. The relation between a bond

Question

Coupon Rates, Yield Rates, and Bond Issuance Prices. The relation between a bond’s coupon rate and

yield rate is known to influence a bond’s issuance price. Presented below are coupon rates and yield rates

for a selection of corporate bonds. Identify whether each bond was sold at a discount, at its par value, or at a premium, and explain why.

Bond_______Coupon Rate ______Yield Rate

A ........................ 7.35% ___________7.55%

B ........................ 8.9 ______________8.0

C........................ 5.0 ______________5.0

D ........................ 3.5______________ 3.4

E ........................ 8.8 ______________9.2

Explanation / Answer

When Coupon rate is less than yield ,Bonds are trading at discount .whereas when coupon rate is higher than yield ,bonds are trading at premium .

When coupon rate is equal to yield ,bond sells at par .

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