The correct answer is: A. 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 face value of a bond is the amount that the borrower agrees to repay at maturity. The coupon rate is the interest rate that the borrower pays on the bond, and it is usually expressed as a percentage of the face value.
If the coupon rate is more than the current rate of interest, then the bond will be sold at a premium, which means that the investor will pay more than the face value of the bond. This is because investors are willing to pay more for a bond that pays a higher interest rate.
Here is a brief explanation of each option:
- Option A: More than its par value. This is the correct answer. If the coupon rate is more than the current rate of interest, then the bond will be sold at a premium, which means that the investor will pay more than the face value of the bond.
- Option B: Seasoned par value. This is not the correct answer. A seasoned bond is a bond that has been issued for some time and is no longer being actively traded. The price of a seasoned bond will fluctuate based on market conditions, but it will not necessarily be equal to its par value.
- Option C: At par value. This is not the correct answer. If the coupon rate is equal to the current rate of interest, then the bond will be sold at par value. However, if the coupon rate is more than the current rate of interest, then the bond will be sold at a premium.
- Option D: Below its par value. This is not the correct answer. If the coupon rate is less than the current rate of interest, then the bond will be sold at a discount, which means that the investor will pay less than the face value of the bond.