If the Dollar Price of a Bond Is $4,000 and Its

question 122

Multiple Choice

If the dollar price of a bond is $4,000 and its par value is $4,250,the interest rate is equal to:

• A) 5.9%.
• B) 5%.
• C) 6.67%.
• D) 6.25%.
• E) 10%.

---

Definitions:

Market Rate

The typical interest rate or cost of borrowing money in the general market, often referred to in terms of loans and savings.

Coupon Rate

The interest rate paid yearly on a bond, depicted as a percentage of its face value.

Premium On Bonds

The amount by which the selling price of a bond exceeds its face value.

Present Value Factors

The factors used in calculating the present value of a sum of money or a stream of cash flows given a specified rate of return.