If the Required Rate of Return on a Bond Is

question 30

True/False

If the required rate of return on a bond is greater than its coupon interest rate (and rd remains above the coupon rate), the market value of that bond will always be below its par value until the bond matures, at which time its market value will equal its par value. (Accrued interest between interest payment dates should not be considered when answering this question.)

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Definitions:

Net Present Value

A financial metric used to assess the profitability of an investment, calculated by subtracting the present value of cash outflows from the present value of cash inflows.