Which of the Following Bonds Would You Prefer to Be

question 15

Multiple Choice

Which of the following bonds would you prefer to be buying?

• A)a $10,000 face-value security with a 10 percent coupon selling for $9,000
• B)a $10,000 face-value security with a 7 percent coupon selling for $10,000
• C)a $10,000 face-value security with a 9 percent coupon selling for $10,000
• D)a $10,000 face-value security with a 10 percent coupon selling for $10,000

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Definitions:

Consolidation Approach

A method in accounting where the financial statements of a parent company and its subsidiaries are presented as one.

Parent-Company Method

A method of accounting wherein investments in subsidiaries are shown at cost or at fair value within the parent company's financial statements.

Ownership Risk

The risk of loss in value or return on investment due to changes in ownership structure or disputes over property rights.

Share Dilution

A reduction in existing shareholders' ownership percentage caused by the issuance of new shares.