If a bond has a 6% coupon and is trading with an 8.34% basis, how is it priced in the market?

When evaluating how a bond is priced in the market, the relationship between the bond's coupon rate and the yield to maturity (reflective of the market interest rate, or basis) is essential. In this case, the bond has a coupon rate of 6%, which signifies the annual interest payment relative to its face value. However, the current market basis, or yield, is 8.34%.

When a bond's coupon rate is lower than the current market yield, investors will not pay full price (or par value) for the bond since they can find other investments that offer a higher return. To make the bond more attractive to potential buyers, it must be priced lower than its par value, which is referred to as trading at a discount. This discount compensates for the lower interest payments relative to new issues in the market that pay higher yields.

Thus, the bond is correctly priced at a discount in the market to align with the prevailing higher yields, making the choice accurate.