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Gillberg4
Would it ever make sense to pay $1100 for a coupon bond that has a face value of $1000?
                     
 




Mr. Economist
Yes. Most of the other answers seemed to have been made up without a lot of thought.

You would pay more than the face value of a bond if the coupon rate (interest rate) was higher than the current market rate.

That price would give you a yield to maturity comparable to the comparable yield in the market.

Use a financial calculator or excel spreadsheet with the "PV" function and use this as an example with a bond that makes annual coupon payments of 6% for simplicity:

FV=-1000
I=3.77%
N=5
PMT=60
PV= ?

Solve for PV and you will get $1100. It would make sense if the market interest rate on similar bonds was 3.77% and the coupon rate was 6%. This is just one example, but there answers like this for any market interest rate.


MOM KNOWS EVERYTHING
Well, if it still has several redeemable coupons, and the interest will add up to over $100.00 when you redeem them, then yes, it would make sense.


simi-guy
Rating
absolutely...as long as the annual yield is on the coupons is sufficent to cover the amount you paid above the initial price of the bond.


mrs michelle
Rating
nope, total scam


Ms. Understood
Rating
Hell 2 da **** Na!!!!!


pariswynn
Yes, if it would be worth more that 1100 in the future.


greeneyedevil
Only to someone with your level of intellect.


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