If a Bond Is Purchased at a Price Below the Face

question 95

Multiple Choice

If a bond is purchased at a price below the face value,the yield to maturity will be:

• A)greater than the stated interest rate.
• B)the same as the stated interest rate.
• C)less than the stated interest rate.
• D)zero.
• E)of no significance.

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Definitions:

Advertisement

A form of communication used to promote or sell a product, service, or idea to potential customers.

Valid Offer

A proposal by one party to another intending to create a legally binding agreement, subject to acceptance by the party to whom it is made.

Authorized Means

Officially approved or recognized methods or procedures for achieving a specified end.

Acceptance

In contract law, the agreement by the party receiving an offer to the terms of that offer, leading to a binding contract.