Which of the Following Bonds Is Trading at a Premium

question 77

Multiple Choice

Which of the following bonds is trading at a premium?

• A) a ten-year bond with a $4000 face value whose yield to maturity is 6.0% and coupon rate is 5.9% APR paid semiannually
• B) a 15-year bond with a $10,000 face value whose yield to maturity is 8.0% and coupon rate is 7.8% APR paid semiannually
• C) a two-year bond with a $50,000 face value whose yield to maturity is 5.2% and coupon rate is 5.2% APR paid monthly
• D) a five-year bond with a $2000 face value whose yield to maturity is 7.0% and coupon rate is 7.2% APR paid semiannually

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Definitions:

Variable Overhead Spending Variance

The difference between the actual variable overheads incurred and the expected variable overheads based on the standard cost for the actual production level.

Standard Variable Overhead Rate

The estimated cost per unit of the variable overheads that are expected to be incurred in the production process.

Actual Total Variable Overhead Cost

The real expense incurred for variable overheads, which fluctuates with changes in production volume.