Suppose you purchase a bond where the coupon rate is below


Suppose you purchase a bond where the coupon rate is below the discount rate. The bond has two more years until maturity. Suppose that interest rates (on which you based the discount rate) do not change over the next two years.

a. The price of the bond when you purchase it will be at a discount from the face value

b. The price of the bond will gradually increase over the next two years until it will equal the face value

c. Every year this bond will provide a return equal to the discount rate

d. All of the above

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Financial Management: Suppose you purchase a bond where the coupon rate is below
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