The correct answer is: B. more than its par value.
A bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). The borrower issues bonds to raise money and agrees to pay the bond holders a fixed interest rate for a specified period of time until the loan is repaid.
The coupon rate is the interest rate that the bond issuer pays to the bond holders. The going rate of interest is the current market interest rate for similar bonds. If the coupon rate is less than the going rate of interest, then the bond will be sold at a premium, which means that the investor will pay more than the par value of the bond. This is because investors are willing to pay more for a bond that pays a higher interest rate than the current market rate.
Here is a brief explanation of each option:
- A. Seasoned par value. This is not a correct answer because a bond is not sold at its seasoned par value. The seasoned par value is the price at which a bond is sold after it has been issued and has been trading on the secondary market for some time.
- B. More than its par value. This is the correct answer because if the coupon rate is less than the going rate of interest, then the bond will be sold at a premium, which means that the investor will pay more than the par value of the bond.
- C. Seasoned par value. This is not a correct answer because a bond is not sold at its seasoned par value. The seasoned par value is the price at which a bond is sold after it has been issued and has been trading on the secondary market for some time.
- D. At par value. This is not a correct answer because if the coupon rate is less than the going rate of interest, then the bond will be sold at a premium, which means that the investor will pay more than the par value of the bond.