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

question 113

Multiple Choice

A company releases a five-year bond with a face value of $1000 and coupons paid semi-annually.If market interest rates imply a YTM of 6%,what should be the coupon rate offered if the bond is to trade at par?

• A)3%
• B)4%
• C)6%
• D)8%
• E)9%

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Definitions:

Paid-In Capital

The total amount of money or other value that shareholders have contributed to a company in exchange for shares of stock, indicating the funds raised from equity rather than from ongoing operations.

Par Value

The face value of a bond or the nominal value of a stock, as stated by the issuing company in its charter.

Common Stock

Represents equity ownership in a corporation, giving shareholders voting rights and a claim on a portion of the company's profits through dividends.

Treasury Shares

Shares that were issued and then repurchased by the issuer, reducing the quantity of outstanding stock.