单选题 A year ago a company issued a bond with a face value of $1000 with an 8 percent coupon. Now the prevailing market yield is 10 percent. What happens to the bond? The: A. bond is traded at a market price higher than $1000. B. bond is traded at a market price less than $1000. C. company has to issue a new 2 -percent coupon bond.

【正确答案】 B

【答案解析】A bonds price/value has an inverse relationship with interest rates. Since interest rates are increasing (from 8% when issued to 10% now), the bond will be selling at a discount. This happens so an investor will be able to purchase the bond and still earn the same yield that the market currently offers.