A 4-Year Default-Free Security with a Face Value of $1000

question 64

Multiple Choice

A 4-year default-free security with a face value of $1000 and an annual coupon rate of 5.25% will trade:

• A)at a premium.
• B)at par.
• C)at a discount.
• D)There is insufficient information provided to answer this question.

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Definitions:

Conservatism

A principle in accounting that recommends erring on the side of caution and underestimating rather than overestimating profits and values.

New Evidence

Recent information or data that offering fresh insights, usually changing or confirming existing understandings.

Behavioral Finance

A field of finance that proposes psychology-based theories to explain stock market anomalies and investing behaviors.

Security Prices

The cost at which securities, such as stocks or bonds, are bought and sold in the market, determined by supply and demand dynamics.