Assume a Bond Is Currently Selling at Par Value

question 95

Multiple Choice

Assume a bond is currently selling at par value.What will happen in the future if the yield on the bond is lower than the coupon rate?

• A) The price of the bond will increase.
• B) The coupon rate of the bond will increase.
• C) The par value of the bond will decrease.
• D) The coupon payments will be adjusted to the new discount rate.

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Definitions:

Impression

The overall perception or judgment formed about something or someone based on various information sources and interactions.

Princesses

Historically or in storybooks, female members of a royal family, especially daughters of a king and queen.

Schema Accessibility

The ease with which a mental schema (a structured set of concepts) can be retrieved from memory, influencing how people encode and recall information.

Arrogance

An attitude of superior importance or presumption often manifested through an overbearing manner.