If a Bond Is Purchased at a Price Above the Face

question 45

Multiple Choice

If a bond is purchased at a price above the face value,the yield to maturity is:

• A)greater than the stated interest rate.
• B)the same as the stated interest rate.
• C)less than the stated interest rate.
• D)zero.
• E)of no significance.

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Definitions:

Buyer's Expense

Buyer's expense refers to costs that the purchaser of goods or services is required to pay, outside of the purchase price, such as shipping or taxes.

Conditional Contracts

Agreements that become enforceable only upon the occurrence of specified conditions.

Sale-On-Approval Contracts

Contracts that allow buyers to take possession of goods before deciding whether to complete the purchase, often used in sales where inspection is necessary.

Condition-Or-Sale Contracts

Agreements that stipulate the sale of goods is dependent on certain conditions being met, often used to protect the interests of the seller.