If Bonds Are Issued at a Discount, It Means That

question 110

Multiple Choice

If bonds are issued at a discount, it means that the

• A) bondholder will receive effectively less interest than the contractual rate of interest
• B) market interest rate is lower than the contractual interest rate
• C) market interest rate is higher than the contractual interest rate
• D) financial strength of the issuer is suspect

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Definitions:

Primacy Effect

The tendency to remember information at the beginning of a list better than information in the middle or end.

Perception

The cognitive process of interpreting and organizing sensory information to understand the environment.

Consensus

General agreement among a group of people or the general opinion of a group.

Distinctiveness

Refers to how much an object or person stands out as compared to others in the same category or environment.