Suppose You Buy a Bond with a Face Value of $1,000

question 29

Multiple Choice

Suppose you buy a bond with a face value of $1,000 for $800. What is the interest rate you receive on the bond?

• A) 0.8%
• B) 1.25%
• C) 20%
• D) 25%

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Definitions:

Convertible Debentures

A type of bond that can be converted into a predetermined number of shares of the issuing company’s stock at certain times during its life, usually at the discretion of the bondholder.

Conversion Value

The monetary value of a convertible security (such as a convertible bond) if it were converted into a predetermined number of shares of common stock, generally at the discretion of the holder.

Par Value

The face value of a bond or stock, as stated on the certificate, which is the minimum stated value.

Convertible Debentures

Bonds that can be converted into a predetermined amount of the issuing company's equity at certain times during their life, usually at the discretion of the bondholder.