With Respect to Bonds,when Interest Rates Increase Typically

question 63

Multiple Choice

With respect to bonds,when interest rates increase typically:

• A) the coupon rate also increases.
• B) the coupon rate remains unchanged.
• C) the price of the bond rises.
• D) the price of the bond remains unchanged.

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Definitions:

Bond Interest Expense

The cost associated with borrowing funds through the issuance of bonds, representing the interest payments made to bondholders.

Discount

A reduction in the price of goods or services, often to attract consumers or to reward volume purchases.

Effective Interest Method

An accounting technique used to calculate the amortized cost of a bond or loan and to allocate the interest expense over the borrowing's life.

Sold At A Discount

The sale of an asset or service for a price lower than its nominal or face value.