Canadian Securities Course (CSC) Practice Exam

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Study for the Canadian Securities Course Exam with our comprehensive practice test. Explore flashcards and multiple-choice questions, each with detailed hints and explanations. Prepare for your CSC exam with confidence!

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When does a bond sell at a discount?

If the bond price is $1000
Yield to maturity is equal to the coupon rate
When current yield is high
When YTM is greater than coupon rate

The correct answer is: When YTM is greater than coupon rate

When a bond's yield to maturity (YTM) is greater than its coupon rate, it will sell at a discount. This is because investors are essentially paying less than the face value for the bond, since they will receive lower coupon payments. Options A, B and C are incorrect because they do not accurately describe when a bond sells at a discount. Option A is incorrect because the bond's price does not determine whether it sells at a discount. Option B is incorrect because the YTM and coupon rate are not equal, causing the bond to sell at a premium. Option C is incorrect because the current yield alone does not determine whether a bond sells at a discount.