Expected to remain constant for the life of the bond

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Reference no: EM131016232

You are considering two bonds. Bond A has a 8% annual coupon while Bond B has a 6% annual coupon. Both bonds are valued at the prevailing discount rate of 7% which is expected to remain constant for the life of the bond. Which of the following statements is CORRECT?

a. Both bonds are premium bonds.

b. Both bonds are priced at par.

c. Bond B is a premium bond and bond A is a discount bond.

d. Bond A is a premium bond and bond B is a discount bond.

e. Both bonds are discount bonds.

Please explain answer

Reference no: EM131016232

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