Which of the following statements is true regarding a bond price trading above face value?

Question

Certilyst · Accepted Answer

C Rationale: A bond price trading above face value is trading at a premium. This indicates that the bond is more valuable than its nominal value, often due to higher interest rates compared to current market rates.

When a bond trades at par, it is priced exactly at its face value, which does not apply in this case since the bond is above that value.

A bond trading at a markup refers to the additional costs associated with purchasing the bond, not the bond's market price relative to its face value, making this choice incorrect.

A bond trading at a discount is priced below its face value, which is the opposite of what is described in the question, thereby disqualifying this option.

In summary, only trading at a premium accurately describes a bond that is priced above its face value.

SIE Exam Cheat Sheet

Which of the following statements is true regarding a bond price trading above face value?