If a Bond Investor Pays $1030 for an Annual Coupon

question 11

Multiple Choice

If a bond investor pays $1030 for an annual coupon bond with a face value of $1000,it follows that:

• A) the coupon rate is higher than the current market yield.
• B) the current market yield and coupon rate are equal.
• C) the current market yield is higher than the coupon rate.
• D) not enough information is given to compare the coupon rate and current market yield.

---

Definitions:

Chi-Square Tests

A statistical test used to determine the significant difference between observed and expected frequencies in one or more categories.

Equality

The state or quality of being identical, equal, or equivalent in value, measure, significance, etc.

Degrees of Freedom

The number of independent values or quantities that can be assigned to a statistical distribution, minus the number of parameters estimated.

Chi-Square Distribution

A statistical distribution that represents the distribution of the sum of the squares of k independent standard normal random variables, often used in hypothesis testing.