A Bond Is Issued at $1,000 Par Value During a Time

question 165

Multiple Choice

A bond is issued at $1,000 par value during a time in which interest rates for similar bonds were 8%.Today new bonds issued with a similar credit worthiness is 10%.Which of the following is most likely to be true about the bond.

• A) It is currently selling for a premium
• B) It is currently selling at a discount
• C) currently selling at par
• D) The bond is likely to be called
• E) none of the above

---

Definitions:

Breaking Even

The point at which total costs and total revenues are equal, resulting in no net loss or gain.

Taking a Loss

The action of selling an asset for less than its purchase price, resulting in a financial loss for the seller.

Regulated Natural Monopolies

Companies that operate in a market with no competition due to high infrastructure costs, but their prices and services are regulated by the government to protect consumers.

Public Utilities

Companies that provide essential services such as water, electricity, and telecommunications to the public, usually subject to government regulation.