Bond a and Bond B Both Have a Maturity Value

question 19

Multiple Choice

Bond A and Bond B both have a maturity value of $1,000 and pay annual interest of 9%.The market rate of interest is also 9%.Bond A matures in 4 years and Bond B matures in 5 years.Which of the following is correct?

• A)Bond A will sell for more than Bond B.
• B)Both bonds sell for the same amount, $1,000.
• C)Both bonds sell for more than $1,000.
• D)Bond B will sell for more than Bond A.
• E)There is not sufficient information to answer the question.

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Definitions:

Illegal Payments

Transactions made that are prohibited by law, often in the form of bribes or kickbacks.

Divest

The process of selling off subsidiary business interests or investments.

Strategically

Refers to actions taken by a business or individual that are planned to achieve a specific long-term goal or advantage.

Spinoff

A method of divesting a business unit by setting it up as a separate company and giving its shares to stockholders in proportion to their holdings of the original firm. After the spinoff stockholders can trade the two stocks separately.