Answer: less than the coupon rate.

## Explanation For a bond trading at a premium (above par value): 1. **Current Yield** = Annual Coupon Payment / Current Market Price 2. **Coupon Rate** = Annual Coupon Payment / Par Value When a bond trades at a premium: - Current Market Price > Par Value - Since the denominator in the current yield calculation (market price) is larger than the denominator in the coupon rate calculation (par value) - The current yield will be **less than** the coupon rate **Example**: - Par value = $1,000 - Coupon rate = 5% → Annual coupon = $50 - Market price = $1,100 (premium) - Current yield = $50 / $1,100 = 4.55% - 4.55% < 5% (coupon rate) This relationship holds true because the bond's price is higher than its face value, so the same coupon payment represents a smaller percentage return relative to the higher purchase price.

Author: LeetQuiz .