What Happens to the Coupon Rate of a $1,000 Face

question 70

Multiple Choice

What happens to the coupon rate of a $1,000 face value bond that pays $80 annually in interest if market interest rates change from 9% to 10%?

• A) The coupon rate increases to 10%.
• B) The coupon rate remains at 9%.
• C) The coupon rate remains at 8%.
• D) The coupon rate decreases to 8%.

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Definitions:

Labor

The human effort, both physical and mental, used to produce goods or services, which is typically compensated by wages.

Equivalent Unit

A measure used in cost accounting to express the amount of work done on a product in terms of fully completed units.

First-in

This principle dictates that the earliest goods to be added to inventory are the first ones to be removed from it, commonly applied in financial and inventory management.

Conversion Costs

The sum of labor and overhead costs that are necessary to convert raw materials into finished products.