Bond Yields
An investor purchases a 5% coupon bond at 110. Which statement about the bond's yields is TRUE?
At 110 (premium): YTC < YTM < CY < 5% coupon.
Complete Analysis & Legal Rationale
For a premium bond (purchased at 110 = $1,100 for $1,000 par), the coupon rate (5%) is the highest yield. Since the investor paid more than par, all other yields (current yield, YTM, YTC) will be lower than the stated coupon rate.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Current yield is lower than coupon rate for premium bonds.
YTM is higher than YTC for premium bonds, but both are lower than coupon.
Matches the verified teaching point in the explanation.
YTC is the lowest yield for premium bonds.
Official Standard: Outline-level citation pending rule-specific upgrade. Verify against current FINRA materials.