A Sunpac bond is selling at a premium to its face value. The bond has 3 years to maturity and pays an annual coupon of 6.00%. Based on this information, which of the following statements is correct?

Group of answer choices

The bond’s yield is same as its coupon percentage.

Bonds always sell at a premium because they have coupon payments.

The bond’s yield is greater than its coupon percentage.

The premium represents the high demand for Sunpac bonds.

None of the other answers is correct

Let's analyze the given information about the Sunpac bond to determine the correct statement:

1. **The bond is selling at a premium**: This means that the market price of the bond is higher than its face (par) value.
  
2. **The bond has 3 years to maturity**: This tells us the time remaining until the bondholder receives the face value back.

3. **The bond pays an annual coupon of 6.00%**: This is the interest rate applied to the face value of the bond, which determines the annual coupon payment.

### Key Concepts:
- **Coupon Rate vs. Yield**: The coupon rate is the fixed annual payment as a percentage of the bond's face value. The yield (often referred to as yield to maturity, YTM) is the effective return that an investor would receive if the bond is held to maturity, considering both the bond's current market price and its future cash flows.

### Analysis of the Statements:

1. **The bond’s yield is same as its coupon percentage**:
   - **Incorrect**: If a bond is selling at a premium, it means that the bond's market price is higher than its face value. The yield will be lower than the coupon rate because the investor pays more than the face value for the bond but still receives the same fixed coupon payments.

2. **Bonds always sell at a premium because they have coupon payments**:
   - **Incorrect**: Bonds can sell at a premium, at par, or at a discount depending on the relationship between the coupon rate and the market interest rates, not merely because they have coupon payments.

3. **The bond’s yield is greater than its coupon percentage**:
   - **Incorrect**: As explained, if the bond is selling at a premium, its yield will be lower than the coupon rate, not greater.

4. **The premium represents the high demand for Sunpac bonds**:
   - **Partially Correct**: The premium indicates that the bond's coupon rate is higher than the current market interest rates, which could suggest higher demand. However, this is not the best or complete reason for the bond's premium.

5. **None of the other answers is correct**:
   - **Correct**: Given the analysis above, none of the other statements is entirely accurate in describing the situation.

### Correct Answer: 
**None of the other answers is correct**

Do you want details or have any questions? Here are some related problems for practice:

1. How does a bond's yield to maturity (YTM) change if it is selling at a discount instead of a premium?
2. What happens to the price of a bond when interest rates rise?
3. How is the yield to maturity calculated for a bond selling at par value?
4. What factors influence whether a bond sells at a premium, par, or discount?
5. How does the time to maturity affect the bond's price sensitivity to interest rate changes?

**Tip:** When a bond sells at a premium, it implies that the bond’s coupon rate is higher than the prevailing market interest rates, leading to a lower yield to maturity compared to the coupon rate.

Explore why a Sunpac bond selling at a premium to its face value affects its yield and coupon rate. Learn about bond pricing dynamics and market demand implications.

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