A Bond Is Currently Trading Below Par

question 67

Multiple Choice

A bond is currently trading below par.Which of the following must be true about that bond?

• A) The bond's yield to maturity is less than its coupon rate.
• B) The bond's yield to maturity is equal to its coupon rate.
• C) The bond's yield to maturity is greater than its coupon rate.
• D) The bond is close to maturity.
• E) The bond has just been issued.

---

Definitions:

Bank Certificates

Short for "bank certificates of deposit (CDs)," which are time-deposit financial products offered by banks with fixed interest rates and maturity dates.

Money Market Funds

Investment funds that invest in short-term debt securities, offering high liquidity with a relatively low level of risk.

Restricted Cash

Cash that is not available for immediate use because it is reserved for a specific purpose.

Cash Equivalents

Short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.