Question

The Sisyphean Company has a bond outstanding with a face value of $ 1 comma 000 that reaches maturity in 9 years. The bond certificate indicates that the stated coupon rate for this bond is 8.2​% and that the coupon payments are to be made semiannually. Assuming the appropriate YTM on the Sisyphean bond is 9.7​%, then this bond will trade at

A. a discount.
B. a premium.
C. par.
D. none of the above

Answer 1

A a discount

Step-by-step explanation:

the bond yield 8.2% at par as this is the certificate coupon payment

we should remember the basic of how to determinate a rate is:

`(return)/(cost) = rate \: of \: return`

As the return are fixed the only way to alter the rate of return is by changing the cost (market price of the bond)

The YTM is 9.7% This means the bond is acquire with a discount to make it yield higher.