If the yield to maturity of all of the following bonds is 6%, which will trade at the greatest premium per $100 face value?.

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21-10-2022
Business

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If the yield to maturity of all of the following bonds is 6%, which will trade at the greatest premium per $100 face value?.

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shardiksh890 shardiksh890 · Answer 1 · 2022-10-29T04:55:13-04:00

A bond with a $1,000 face value, five years to maturity and 6.3% annual coupon payments will trade at the greatest premium per $100 face value.

The dollar value of a financial asset when it is issued is referred to as its face value. The face value of a bond is the amount paid by the issuer at maturity, also known as "par value." A stock's face value, on the other hand, is the rate offered by the issuer once the stock would be first issued.

A bond may trade at a premium since such interest rate is greater than the market rate. The bond's price can also be influenced by the company's and the bond's credit ratings. Buyers are prepared to pay a higher price for a creditworthy bond issued by a financially viable issuer.

Here is the complete question-

If the yield to maturity of all of the following bonds is 6%, which will trade at the greatest premium per $100 face value?

A) a bond with a $10,000 face value, four years to maturity and 6.2% semiannual coupon payments

B) a bond with a $500 face value, seven years to maturity and 5.2% annual coupon payments

C) a bond with a $5,000 face value, seven years to maturity and 5.5% annual coupon

payments

D) a bond with a $1,000 face value, five years to maturity and 6.3% annual coupon payments

Learn more on face value-

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