Questi 6-17 (similar to) Suppose a seven-year, $1,000 bond with a 75% coupon rat
ID: 2538603 • Letter: Q
Question
Questi 6-17 (similar to) Suppose a seven-year, $1,000 bond with a 75% coupon rate and semiannual coupons is trading with a yield to maturity of 6 55 a. Is this bond currently trading at a discount, at par, or at a premium? Explain. b. If the yield to maturity of the bond rises to 7 48% APR with semiannual compounding), what price will the bond trade for? a. Is this bond currently trading at a discount, at par, or at a premium? Explain. (Select the best choice below.) 0 A. Because the yield to maturity is greater than the coupon rate, the bond is trading at a premium. B. Because the yield to maturity is less than the coupon rate, the bond is trading at a premium. C. Because the yield to maturity is less than the coupon rate, the bond is trading at a discount. 0 D. Because the yield to maturity is greater than the coupon rate, the bond is trading at par. Click to select your answer and then click Check Answer part remaining Clear All Final CheckExplanation / Answer
When the amount received is more than book value than it is to be termed as Premium.
As yield is higher than the coupon rates. The bond will be trading at premium.
As investors will earn more than the value marked in bonds.
Hence from the above information option A is correct
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