A Company Releases a Five-Year Bond with a Face Value

question 93

Multiple Choice

A company releases a five-year bond with a face value of $1000 and coupons paid semiannually. If market interest rates imply a YTM of 8%, which of the following coupon rates will cause the bond to be issued at a premium?

• A) 7%
• B) 6%
• C) 8%
• D) 10%

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Definitions:

Achaemenids

Refers to the first Persian Empire, ruled by the Achaemenid dynasty from approximately 550-330 BCE, known for its impressive administration system, monumental architecture, and multicultural approach to governance.

Lion Capital

The top part of an Ashokan pillar, famously known as the national emblem of India, featuring four lions standing back to back.

Ashoka

was an ancient Indian emperor of the Maurya Dynasty, who ruled the Indian subcontinent from c. 268 to 232 BCE, known for his conversion to Buddhism and spreading Buddhist principles.

Upanishads

South Asian religious texts of ca. 800–500 BC that introduced the concepts of samsara, karma, and moksha.