When the Required Return Is Constant and Equal to the Coupon

question 215

Multiple Choice

When the required return is constant and equal to the coupon rate, the price of a bond as it approaches its maturity date will ________.

• A) remain at par
• B) increase
• C) decrease
• D) change depending on whether it is a discount or premium bond

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Definitions:

Bank Deposit

Money placed into a banking institution for safekeeping, which can earn interest depending on the type of account.

Weighted Average Float

Weighted average float refers to the average time between when a check is deposited in a bank and when the funds are made available, weighted by the value of each check.

Clearing Times

The period it takes for a transaction to be processed, confirmed, and settled between buyer and seller in the financial markets.