When Pricing Bonds, If a Bond's Coupon Rate Is Less

question 299

Multiple Choice

When pricing bonds, if a bond's coupon rate is less than the required rate of return, then:

• A) The holder of the bond is assured of a profit regardless of when the bond is eventually sold.
• B) The holder of the bond will realize a capital gain if the bond is held to maturity.
• C) The bond sells at par because the required rate of return is adjusted to reflect the discrepancy.
• D) The bond sells at a premium if it has a long maturity, a discount if it has a short maturity.
• E) The bond sells at a discount if it has a long maturity, a premium if it has a short maturity.

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Definitions:

Freshwater

Water that contains minimal amounts of dissolved salts, found in rivers, lakes, and streams, supporting a diverse range of plants and animals.

Hypotonic

Describes a solution with a lower concentration of solutes compared to another, resulting in water influx into cells.

Tissue Fluids

Fluids that surround the cells of tissues, providing nutrients and removing waste, also known as interstitial fluid.

Epidermis

(1) An outer layer of cells that covers the body of plants and functions primarily for protection. (2) The outer layer of vertebrate skin.