Which of the following statements is NOT true for a bond trading at a premium?

A bond trading at a premium is one that is priced above its face value, which typically occurs when the bond's coupon rate is higher than prevailing interest rates. This scenario creates a situation where the bond’s characteristics lead to certain truths about its yields.

When a bond is at a premium, its current yield, which is calculated by dividing its annual coupon payment by its current market price, will be lower than its nominal yield (the coupon rate). This is because the premium purchase price reduces the overall yield from the coupon payments.

Additionally, bonds at a premium will trade at a basis (the yield to maturity) that is lower than the coupon rate. The basis reflects the overall return on the bond considering the premium paid, which will result in a yield that is less than the fixed rates of interest provided by the coupon.

Conversely, the current yield will be higher than the yield basis for bonds trading at a premium, since the current yield is derived from the coupon payment relative to the higher purchase price, resulting in a lower effective yield.

Given these characteristics, it is correct to state that the basis and coupon will not be identical for a bond trading at a premium. The coupon rate represents the bond's fixed interest payments, while the basis accounts for