The Coupon Rate of a Bond Equals

question 53

Multiple Choice

The coupon rate of a bond equals:

• A) its yield to maturity.
• B) a defined percentage of its face value.
• C) the yield to maturity when the bond sells at a discount.
• D) the annual interest divided by the current market price.

---

Definitions:

Flotation Costs

Expenses incurred by a company in issuing new securities, including underwriting fees, legal fees, and registration fees.

Financial Leverage

The use of borrowed money to increase the potential return of an investment.

Unlevered Cost of Capital

The cost of capital for a company with no debt, reflecting the required rate of return on equity for an entirely equity-financed firm.

After-Tax Net Income

The amount of money a company or individual earns after all taxes have been deducted from the gross income, reflecting the actual profit.