What Causes Bonds to Sell for a Premium Compared to Face

question 33

Multiple Choice

What causes bonds to sell for a premium compared to face value?

• A) The bonds have high ratings.
• B) The bonds have a long period until maturity.
• C) The bonds have a higher than market coupon rate.
• D) The bonds are of speculative grade.

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Definitions:

At-Risk Amount

The value of money that an investor can actually lose in an investment, often determining the limit of deductible losses in tax contexts.

AMT Purposes

For Alternative Minimum Tax calculations, specific adjustments and tax preference items that determine AMT taxable income.

At-Risk Amount

The portion of an investment under which the investor could actually lose money, often considered in tax implications and incentives.

Full Recourse Debt

A loan in which the lender is allowed to claim against the borrower’s other assets in addition to the collateral if the borrower defaults.