General Studies · Corporate Bonds Valuation
Which of the following statements is correct regarding the valuation of a corporate bond in a secondary market transaction?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The valuation of the bond will be determined solely by the semi-annual coupon payment, completely independent of the current market yield.
- 2The bond's price will be exactly at par because the issuer has a high AAA credit rating.
- 3Since the coupon rate (7.5%) is less than the current market yield (8.0%), the bond will trade at a discount, implying its market price is below its face value.✓
- 4Since the coupon rate (7.5%) is less than the current market yield (8.0%), the bond will trade at a premium, implying its market price is above its face value.
Correct answer
Since the coupon rate (7.5%) is less than the current market yield (8.0%), the bond will trade at a discount, implying its market price is below its face value.
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