Free CFA Certification Practice Questions:
The following table contains the coupon rate, current yield, and the yield
to maturity of various bonds. Based on this table, which of the following statements
would be TRUE?
Statement 1: "Bonds B, C, E would be priced above Par value"
Statement 2: "Bond D would be priced below Par value, while Bond E would be priced above par value"
A) Both statements are correct
B) Neither statement is correct
C) Statement 1 is incorrect, while Statement 2 is correct
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[Ans: C]
The following table describes the relationships between the price
of a bond, coupon rate, current yield, and yield to maturity:
| Bond Selling At | Relationship |
| Par | Coupon Rate = Current Yield = Yield to Maturity |
| Discount | Coupon Rate < Current Yield < Yield to Maturity |
| Premium | Coupon Rate > Current Yield > Yield to Maturity |
Bond A should be selling at par value
Bond B, E should be selling at a premium (i.e. above par value)
Bond C, D should be selling at a discount (below par value)
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