A Bond Is Issued at Par Value When

question 19

Multiple Choice

A bond is issued at par value when:

• A)The bond pays no interest.
• B)The bond is not between interest payment dates.
• C)Straight line amortization is used by the company.
• D)The market rate of interest is the same as the contract rate of interest.
• E)The bond is callable.

---

Definitions:

Liquidity Premiums

Additional yield that investors require to hold securities with lower liquidity, compensating them for the higher cost and difficulty of trading such securities.

Future Expected Short Rates

The anticipated interest rates for short-term debt instruments in the future, important for forecasting and investment strategies.

Forward Rate

An agreed-upon interest rate for a financial transaction that will occur in the future, used in forward contracts and rate agreements.

Zero-coupon Bond

A bond that does not pay periodic interest and is sold at a discount from face value; its return comes from the difference between the purchase price and the face value paid at maturity.