A Bond Will Trade at a Discount If Its Coupon

question 69

True/False

A bond will trade at a discount if its coupon rate is less than its yield to maturity.

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Definitions:

Liquidity Premium

Forward rate minus expected future short interest rate.

Interest Rates

The cost of borrowing money or the rate paid for the privilege of using someone else's money, usually expressed as a percentage.

Inverted Yield Curve

An inverted yield curve occurs when long-term debt instruments have a lower yield than short-term debt instruments, often considered a forewarning of economic recession.

Convertible Bonds

Bonds issued by a corporation that can be converted into a predetermined number of the company's shares at certain times during the bond's life, usually at the discretion of the bondholder.