An Increase in the Market Rate of Return on an Outstanding

question 26

Multiple Choice

An increase in the market rate of return on an outstanding bond will

• A) increase the coupon rate.
• B) decrease the bond price.
• C) decrease the coupon rate.
• D) increase the bond price.

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Definitions:

Trading

The act of buying and selling securities, commodities, or other financial instruments in financial markets with the aim of profiting from price movements.

Trading Securities

Financial instruments that are purchased and held primarily for selling them in the near term, with the objective of generating profits on short-term price differences.

Available-For-Sale Securities

Debt or equity securities not classified as held-to-maturity or trading securities, measured at fair value with changes recognized in other comprehensive income.

Realized Gain

is the profit made from selling an asset at a higher price than its purchase cost, officially recognized once the transaction is completed.