If the Yield to Maturity (The Market Rate of Return)

question 127

Multiple Choice

If the yield to maturity (the market rate of return) of a bond is less than its coupon rate, the bond should be:

• A)selling at a discount; i.e., the bond's market price should be less than its face (maturity) value.
• B)selling at a premium; i.e., the bond's market price should be greater than its face value.
• C)selling at par; i.e., the bond's market price should be the same as its face value.
• D)a floating-rate bond yielding market adjusted interest.
• E)an indexed bond that adjusts interest payments on the basis of an inflation index.

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Definitions:

Luxury Good

High-quality products or services that are not necessary for survival but are purchased for their extravagance or pleasure.

Specific Brand

A unique identification or name for a particular product that differentiates it from others within the same category.

Price Elasticity of Supply

A measure of how much the quantity supplied of a good responds to a change in the price of that good, with elasticity differing across products.

Linear Demand Curve

A graphical representation of demand that shows a direct, constant relationship between price and quantity demanded.