A bond thathas a yield of 4 and a coupon rate of 5 must have

A bond thathas a yield of 4% and a coupon rate of 5% must have price that is higher than/lower than a zero-coupon bond.

Solution

1. A bond that has a yield of 4% and a coupon rate of 5% must have price that is higher than a zero-coupon bond.

Because as ZCB only pays at the end of the redemption with no interest in between. when we take other bonds they are atleat paying some interest in between till redemption. Thus Bond will have higher value than ZCB