If the Coupon Rate Equals the Required Rate of Return

question 75

Multiple Choice

If the coupon rate equals the required rate of return, the price of the bond

• A)should be above its par value.
• B)should be below its par value.
• C)should be equal to its par value.
• D)is negligible.

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Definitions:

Strike Price

The predetermined price at which an option's contract can be exercised, allowing for the purchase or sale of the underlying asset.

Strike Price

The price at which the holder of an option contract can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.

Risk-free

An investment category that promises return payments with zero default risk, often exemplified by treasury bonds of stable governments.

Call Option

A financial contract giving the buyer the right, but not the obligation, to purchase an asset at a specified price within a specific time period.