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.

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Definitions:

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Mid-Eighteenth Century

A period referring to the middle of the 18th century, around the 1750s, known for Enlightenment ideas, colonial expansion, and early industrial developments.

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A system where individuals are owned by others, deprived of personal freedom and forced to perform labor or services against their will.

Eighteenth Century

A period from 1701 to 1800 that is marked by significant historical events including the Enlightenment and the American Revolution.