Which of the following bonds is trading at a premium? Which of the following bon

ID: 2628725 • Letter: W

Question

Which of the following bonds is trading at a premium?

a) a ten-year bond with a $4000 face value whose yield to maturity is 6.0% and coupon rate is 5.9% APR paid semiannually

b) a two-year bond with a $50,000 face value whose yield to maturity is 5.2% and coupon rate is 5.2% APR paid monthly

c) a five-year bond with a $2000 face value whose yield to maturity is 7.0% and coupon rate is 7.2% APR paid semiannually

d) a 15-year bond with a $10,000 face value whose yield to maturity is 8.0% and coupon rate is 7.8% APR paid semiannually

a) a ten-year bond with a $4000 face value whose yield to maturity is 6.0% and coupon rate is 5.9% APR paid semiannually

b) a two-year bond with a $50,000 face value whose yield to maturity is 5.2% and coupon rate is 5.2% APR paid monthly

c) a five-year bond with a $2000 face value whose yield to maturity is 7.0% and coupon rate is 7.2% APR paid semiannually

d) a 15-year bond with a $10,000 face value whose yield to maturity is 8.0% and coupon rate is 7.8% APR paid semiannually

For a premium bond, yield to maturity<coupon rate

Therefore the correct answer is:

c) a five-year bond with a $2000 face value whose yield to maturity is 7.0% and coupon rate is 7.2% APR paid semiannually

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