If Current Interest Rates Are Lower Than the Coupon Rate

Multiple Choice

If current interest rates are lower than the coupon rate, investors owning a bond can:

A) sell the bond at a premium, because lower interest rates will cause investors to bid price up to the point where their investment yields the market's return.
B) only sell the bond at a discount (below face value) , recognizing that the lower the price of the bond, the closer the yield becomes to the market's return.
C) be wise to hold the bond until maturity, at which point the market value will greater than the face value of the bond.
D) None of the above