Which of the following statements is correct?
a. If a bond’s yield to maturity exceeds its coupon rate, the bond’s current yield must also exceed its coupon rate.
b. If a bond’s yield to maturity exceeds its coupon rate, the bond’s price must be less than its maturity value.
The correct answer is b. I would like to know why option a is incorrect.
If bond price is less than maturity value, then current yield = (annual coupon payment)/(current bond price) > coupon rate. Is there anything wrong with this reasoning?