Which of the Following Bonds Is Trading at a Premium

question 83

Multiple Choice

Which of the following bonds is trading at a premium?

• A) a five-year bond with a $2,000 face value whose yield to maturity is 7.0% and coupon rate is 7.2% APR paid semiannually
• B) a ten-year bond with a $4,000 face value whose yield to maturity is 6.0% and coupon rate is 5.9% APR paid semiannually
• C) a 15-year bond with a $10,000 face value whose yield to maturity is 8.0% and coupon rate is 7.8% APR paid semiannually
• D) a two-year bond with a $50,000 face value whose yield to maturity is 5.2% and coupon rate is 5.2% APR paid monthly

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Definitions:

Default

Failure to fulfill a legal obligation, especially failure to pay a debt on time.

Profit Share

This refers to a portion of a company's profits allocated to its employees, shareholders, or partners as a form of incentive or bonus.

LLC

Limited Liability Company; a business structure in the U.S. that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.

Nonwrongful Dissociation

This term refers to a situation where a partner leaves a partnership in accordance with the terms of the partnership agreement and/or applicable law, without incurring liability for wrongful dissociation.