Assume a Semi-Annual Coupon Bond Matures in 3 Years, Has

question 15

Multiple Choice

Assume a semi-annual coupon bond matures in 3 years, has a face value of $1,000, a current market price of $1,089, and a 5 percent coupon. Which one of the following statements is correct concerning this bond?

• A)The current coupon rate is greater than 5 percent.
• B)The bond is a money market instrument.
• C)The bond will pay less annual interest now than when it was originally issued.
• D)The current yield is less than the coupon rate.
• E)The bond will pay semi-annual payments of $50 each.

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Definitions:

Stakeholders

Stakeholders are individuals, groups, or organizations that have an interest in the performance and actions of a company, which can include shareholders, employees, customers, and suppliers.

Conflicts of Interest

Situations where an individual's or entity’s obligations to multiple parties could compromise the decision-making or actions taken, typically due to a clash between personal and professional interests.

Accounting Profit

The net income of a company as calculated by subtracting total expenses from total revenue, according to accounting rules.

Agency Problem

A conflict of interest arising between parties with a principal-agent relationship, where the agent's actions may not align with the principal's best interests.