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Answer: Equal to the sum of the present values of the bond's cash flows discounted at its yield to maturity.
**Explanation:** The bond's price (or value) determined using spot rates is often referred to as the 'no-arbitrage value.' When the current market price equals the no-arbitrage value, discounting the bond's cash flows by either spot rates or yield to maturity will result in the same price. The relationship between the current market price and par value does not affect the no-arbitrage value. Therefore, the correct answer is **B**, as the sum of the present values discounted at spot rates equals the sum discounted at the yield to maturity.
Author: LeetQuiz Editorial Team
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A bond trading at its no-arbitrage value is priced at a premium. The sum of the present value of the bond's cash flows discounted at spot rates is:
A
Less than the sum of the present values of the bond's cash flows discounted at its yield to maturity.
B
Equal to the sum of the present values of the bond's cash flows discounted at its yield to maturity.
C
Greater than the sum of the present values of the bond's cash flows discounted at its yield to maturity.
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