If a bond has a coupon rate of 8% but the required rate (market rate) is 10%, will this bond sell at par, discount, or a premium. Please explain in detail, not understanding the difference between the coupon rate and the market rate.
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If a bond has a coupon rate of 8% but the required rate (market rate) is 10%, will this bond sell at par, discount, or a premium.
Please explain in detail, not understanding the difference between the coupon rate and the market rate.
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Solution Summary
This solution explains the difference between a coupon rate and market rate.
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Coupon rate is the interest rate to be paid on the bond at regular interval. In this case coupon rate is 8%. If the face value of the bond is $1000, the holder of the bond will receive $80 at the end of every year during the duration of the bond. In addition the bond holder will receive $1000 back on the maturity of the ...
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