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A bond sells at discount. Which of the following is feasible?

[YTM = yield to maturity]

Solution

✅ Correct Option: 1

For a bond selling at a discount, market price is below face value, so coupon yield is less than current yield, which in turn is less than YTM.

Only the ordering 10%<11%<12%10\%<11\%<12\% with YTM highest satisfies coupon yield << current yield << YTM.

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