What Happens When a Bond's Expected Cash Flows Are Discounted

question 90

Multiple Choice

What happens when a bond's expected cash flows are discounted at a rate lower than the bond's coupon rate?

• A) The price of the bond increases.
• B) The coupon rate of the bond increases.
• C) The par value of the bond decreases.
• D) The coupon payments are adjusted to the new discount rate.

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Definitions:

Water Pollution

The contamination of water bodies (e.g., lakes, rivers, oceans, aquifers) with pollutants that degrade water quality and ecosystem health.

Investing Activities

Part of the cash flow statement that shows the cash spent on and generated from long-term asset operations and investments.

Long-Term Investments

Investments in stocks, bonds, or other assets that a company intends to hold for more than one fiscal year.

Interest Revenue

Income earned from lending money or investing in interest-bearing financial instruments.