Stephenson Co.'s 15-year bond with a face value of $1,000 currently sells for $850. Which of the following statements is correct? A. The bond's coupon rate exceeds its current yield.
B. The bond's yield to maturity is greater than its coupon rate.
C. If the yield to maturity stays constant until the bond matures, the bond's price will remain at $850.
D. The bonds current yield exceeds its yield to maturity.

The bond's yield to maturity is greater than its coupon rate.

Explanation:

At a discount, the price of the bond is less than its face value, from bond theory principles, this is likely to happen when YTM is more than the coupon rate of the bond. Due to this the present value of the coupons and their face value are going to be lower than 1000 since YTM is greater.

The coupon rate is given as annual interest divided by face value

While

The yield is interest/ current price.

The answer to the question is therefore

The bond's yield to maturity is greater than its coupon rate.

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.

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