A Bond with a $100 Annual Interest Payment and $1,000

question 61

True/False

A bond with a $100 annual interest payment and $1,000 face value with five years to maturity (not expected to default) would sell for a premium if interest rates were below 9% and would sell for a discount if interest rates were greater than 11%. 

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Definitions:

Retained Earnings

Funds that are not distributed as dividends but are reserved by the company to reinvest in its business, pay off debt, or save for future use.

Deficit

The amount by which expenses exceed income or liabilities exceed assets.

Dividend Yield Ratio

An indicator of the yearly dividends paid by a corporation as a proportion of its stock price.