If a Bond Is Selling at Par Value, Which of the Following

question 37

Multiple Choice

If a bond is selling at par value, which of the following statements is correct?

• A) The current yield must equal the coupon rate.
• B) The current yield must equal the yield to maturity.
• C) Both of these statements are correct.
• D) None of these choices are correct.

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Definitions:

Investment Incentives

Benefits, typically in the form of tax reductions or credits, offered to encourage investment by individuals and corporations.

Loanable Funds

A term referring to all the money available for borrowing in the financial markets, from various sources including savings and investments.

Interest Rate

The amount charged by a lender to a borrower for the use of assets, expressed as a percentage of the principal, typically over a one-year period.

Investment

The act of spending money with the expectation of obtaining an additional income or profit, often involving financial investments, purchasing assets, or funding new business ventures.