Which One of the Following Is Correct When Computing the Price

question 60

Multiple Choice

Which one of the following is correct when computing the price of a debt security when using a discount yield?

• A)The price will exceed the face value.
• B)An increase in the discount yield will increase the current price.
• C)The current price will decrease as the days to maturity decrease.
• D)The computation will be based on a 360-day year.
• E)The computation will consider leap years.

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Definitions:

Offer Price

The price at which a seller is willing to sell a security or asset, often differing from the bid or purchase price offered by a buyer.

Underwriters

Financial specialists who assess and take on certain risks by guaranteeing to pay a certain amount for securities offered by a corporation or government.

Best-efforts Offering

A type of securities underwriting where the underwriter agrees to sell as much of the offering as possible, but not to purchase the securities outright.

Syndicate

A group of individuals or organizations that come together to conduct business or pursue a common goal, often used in reference to investment and banking sectors.