Question: When a bond's coupon rate exceeds its yield to maturity (YTM), the bond is considered a premium bond, meaning its bond value is greater than

When a bond's coupon rate exceeds its yield to maturity (YTM), the bond is considered a premium bond, meaning its bond value is greater than its face value. This occurs because the bond pays more interest than the current market rate, making it more attractive to investors. Conversely, when the coupon rate is lower than the YTM, the bond becomes a discount bond, valued less than its face value due to lower interest payments than the market offers. This inverse relationship highlights interest rate risk, which represents the potential for bond value fluctuations due to changing interest rates, affecting investment returns

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