Assume a Bond Is Currently Selling at Par Value

question 81

Multiple Choice

Assume a bond is currently selling at par value. What will happen if the bond's expected cash flows are discounted at a rate lower than the bond's coupon rate?

• A) The price of the bond will increase.
• B) The coupon rate of the bond will increase.
• C) The par value of the bond will decrease.
• D)The coupon payments will be adjusted to the new discount rate.

---

Definitions:

Unconscious Drives

Inner impulses, desires, or wishes that are not directly accessible to an individual's awareness but influence behaviors and feelings.

Conflicts

Disagreements or disputes between individuals or groups, often resulting from differing needs, values, or interests.

Evolutionary Perspective

A psychological approach that explains human thoughts and behaviors in terms of their adaptive or survival value over the course of human history.

Behavioral Perspective

A way of looking at psychological issues by studying observable behavior and what determines it, without focusing on mental states.