Which One of the Following Must Be Correct for a Bond

question 90

Multiple Choice

Which one of the following must be correct for a bond currently selling at a premium?

• A)its coupon rate is variable.
• B)its current yield is lower than its coupon rate.
• C)its yield to maturity is higher than its coupon rate.
• D)its coupon rate is lower than the current market rate on similar bonds.

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Definitions:

Cosine

A trigonometric function that represents the ratio of the length of the adjacent side to the hypotenuse of a right-angled triangle.

RMS

Root Mean Square is a statistical tool used to determine the magnitude of a variable quantity, frequently applied in determining the effective value of alternating current.

Peak

The maximum value or highest point reached by a quantity or phenomenon, such as voltage or current in a circuit.

Skin Effect

The tendency of electrons to move toward the outside of a conductor in an AC circuit.