Engineering Board Exam Reviewer · Bonds · easy
A P5,000 bond pays 6% annual interest and matures in 10 years. If the required yield rate is 8%, is the bond priced at a premium or a discount?
- Discount
- Premium
- Par
- Cannot be determined
Answer
A. Discount
Solution
Since the coupon rate (6%) is less than the yield rate (8%), the bond sells at a discount.
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