When Market Interest Rates Exceed a Bond's Coupon Rate,the Bond

question 78

Multiple Choice

When market interest rates exceed a bond's coupon rate,the bond will:

• A) sell for less than par value.
• B) sell for more than par value.
• C) decrease its coupon rate.
• D) increase its coupon rate.

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Definitions:

Accrual Basis

An accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when the cash transaction happens.

Revenue Recognition

The accounting principle that dictates the specific conditions under which income becomes realized as revenue.

Adjusting Entries

Journal entries made at the end of an accounting period to allocate income and expenditures to the period in which they actually occurred.

Prepayments

Payments made in advance for goods or services, which are recorded as assets on the balance sheet until the corresponding goods or services are received.