Assuming There Is No Default Risk,both a Premium Bond and a Discount

question 6

Multiple Choice

Assuming there is no default risk,both a premium bond and a discount bond must share which one of the following characteristics?

• A) market price less than a par value bond
• B) yield-to-maturity less than the coupon rate
• C) maturity value equal to a par value bond
• D) current yield equal to that of a par value bond
• E) coupon rate exceeding the yield-to-maturity

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Definitions:

Net Income

Net income refers to the total profit of a company after all expenses, taxes, and deductions have been subtracted from total revenue.

Owned Subsidiary

A company whose majority of shares or voting rights are held by another company, making it a controlling entity.

Equity Method

The equity method is an accounting technique used by firms to assess the profits earned by their investments in other companies by reporting these profits in proportion to their ownership.

Net Income

The total profit of a company after all expenses, taxes, and costs have been deducted from total revenue. It indicates the company's financial performance over a specified period.