A bond's coupon rate determines the interest$-$based return that a bond pay, and a bondholder's required rate of return reflects the return that a bondholder receive from the investment.

Bond valuation implies a relationship between the bondholder's required rate of return, the bond's coupon rate, and the bond's par value. These relationships can be summarized as follows:

Relationships

When the bond's coupon rate is equal to the bondholder's required return, the bond will trade at

When the bond's coupon rate is greater than the bondholder's required return, the bond will trade at

When the bond's coupon rate is less than the bondholder's required return, the bond will trade at