When Will Bonds Sell at a Discount

question 28

Multiple Choice

When will bonds sell at a discount?

• A)When the coupon rate is below the par value.
• B)When the coupon rate is below the market rate.
• C)When the coupon rate is above the market rate.
• D)When the coupon rate is above the par value.

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Definitions:

Expected Capital Gains Yield

The forecasted price appreciation on an investment or asset, typically expressed as an annual percentage.

Constant Growth Model

A method to value a stock by assuming that dividends grow at a constant rate indefinitely.

Capital Gains

The profit earned from the sale of a capital asset, such as stocks, bonds, or real estate, where the sale price exceeds the purchase price.

Dividend Growth Rate

The annualized percentage rate of growth of a company's dividend payments.