A bond sells at a premium when the coupon rate is greater than the required market yield. Here, the 10-year, 8.00% semi-annual coupon bond would sell above par, or at a premium.

The 15-year, zero-coupon bond priced to yield 9.00% would sell at a discount. Zero-coupon bonds sell at a discount from par, because they pay no coupon. (Coupon rate = 0.00%.) The 10-year, 7.00% semi-annual coupon bond would also sell at a discount, because the coupon rate is less than the required market yield. Note: The information that this is an annual coupon bond is not relevant for this question.

For the examination, remember the following relationships:

Type of Bond	Market Yield to Coupon	Price to Par
Premium	Market Yield < Coupon	Price> Par
Par	Market Yield = Coupon	Price = Par
Discount	Market Yield> Coupon	Price < Par