If the Yield to Maturity (The Market Rate of Return)

question 70

Multiple Choice

If the yield to maturity (the market rate of return) of a bond is less than its coupon rate, the bond should be

• A)selling at a discount; i.e., the bond's market price should be less than its face (maturity) value.
• B)selling at a premium; i.e., the bond's market price should be greater than its face value.
• C)selling at par; i.e., the bond's market price should be the same as its face value.
• D)purchased because it is a good deal.

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Definitions:

Capital

Financial assets or the financial value of assets, such as cash and goods, used by a business to generate income.

Stockholders

People or organizations holding one or more shares in a corporation, thereby having partial ownership of the business.

Legal Capital

The minimum amount of capital that a company is required to maintain by law, often used to protect creditors and shareholders.

Financial Loss

A decrease in net income that results from operating activities, investments, and changes in fair value of assets, exceeding the income from these activities.