A Company Releases a Five-Year Bond with a Face Value

question 41

Multiple Choice

A company releases a five-year bond with a face value of $1000 and coupons paid semiannually. If market interest rates imply a YTM of 6%, what should be the coupon rate offered if the bond is to trade at par?

• A) 3%
• B) 8%
• C) 6%
• D) 4%

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Definitions:

Current Asset

A category of assets that are likely to be converted into cash, sold, or consumed within one business cycle or one year.

Office Equipment

Tangible property (like desks, chairs, and computers) used in an office setting to perform work or operations.

Unearned Revenue

Funds paid to a person or corporation for goods or services that are to be provided or delivered in the future.

Patent

A legal document granted by the government giving an inventor exclusive rights to make, use, and sell an invention for a certain number of years.