easy · Debt Capital Markets
An investor purchases a corporate bond at a price of $1,040.
If the bond has a face value of $1,000, what is the primary reason the yield to maturity (YTM) will be lower than the coupon rate?
- The market yield must rise to match the higher price of the bond.
- The issuer is required to lower the coupon payments when the bond trades above par.
- The investor faces a capital loss over time as the bond price converges to par at maturity.
- The par value of the bond increases to compensate for the higher purchase price.
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