If the Required Rate of Return on a Bond (Rd)

question 14

True/False

If the required rate of return on a bond (rd) is greater than its coupon interest rate and will remain above that rate, then the market value of the bond will always be below its par value until the bond matures, at which time its market value will equal its par value. (Accrued interest between interest payment dates should not be considered when answering this question.)

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Definitions:

Operating Expense

Expenditures that a business incurs through its normal business operations.

Operating Profit

Earnings before interest and taxes (EBIT), representing the profit a business makes from its operations.

Selling Price

The amount for which a product or service is sold to the customer.

Unit Cost

The expenditure involved in generating, keeping, or obtaining one unit of a product or service.