If a Bond Is Purchased at a Price Below the Face

question 107

Multiple Choice

If a bond is purchased at a price below 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:

Stabilizes

Refers to making something more steady or firmly fixed in place, or making a chemical compound resistant to change.

Buffer

A solution that resists changes in pH when acid or alkali is added, mainly composed of a weak acid and its conjugate base.

Chemical Equation

A symbolic representation of a chemical reaction, showing the reactants, products, and, in some cases, the direction of the reaction.

Carbon Dioxide

A clear, unscented gas resulting from the burning of carbon-containing compounds and the act of respiration, which plants use in the process of photosynthesis.