Which Type of Bond Sells at a Discount from Face

question 235

Multiple Choice

Which type of bond sells at a discount from face value, then increases in value annually until it reaches maturity and provides the owner with the total payoff?

• A) High-yield bonds.
• B) Commodity-backed bonds.
• C) Zero coupon bonds.
• D) Junk bonds.

Evaluate strategies for improving comprehension and knowledge retention.

Understand the principles of Modigliani & Miller (M&M) Propositions I & II without taxes, specifically regarding the irrelevance of capital structure.

Comprehend the effect of leverage on the cost of equity according to M&M Proposition II with no taxes.

Grasp the impact of debt financing on a firm's value and the cost of capital when taxes are considered.

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