A Bond Was Issued at a Par Value of $1,000

question 28

Multiple Choice

A bond was issued at a par value of $1,000 when the interest rate for similar bonds was 8%. Presently, new bonds issued with a similar creditworthiness have a 10% interest rate. Which of the following statements about the bond is most likely to be true?

• A) It is currently selling for a premium.
• B) It is currently selling at a discount.
• C) It is currently selling at par.
• D) It is likely to be retired.
• E) The bond's coupon rate will increase.

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Definitions:

Stagflation

A situation in an economy where there is a combination of stagnant economic growth, high unemployment, and high inflation.

New Deal

A collection of initiatives, including programs, public work projects, financial reforms, and regulations, that were implemented by President Franklin D. Roosevelt in the United States throughout the 1930s as a reaction to the Great Depression.

Social Security

A governmental program designed to provide financial assistance to elderly, disabled, and survivors through retirement benefits, disability insurance, and other means.

Americans Working

The portion of the U.S. population engaged in employment, reflecting the labor force's health and economic activity levels.