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

question 46

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%,which of the following coupon rates will cause the bond to be issued at a premium?

• A)3%
• B)4%
• C)6%
• D)8%
• E)5%

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Definitions:

Performance

Refers to the act of carrying out or accomplishing an action, task, or function.

Profit Margin

A financial metric that calculates the percentage of profit derived from revenue after all expenses are subtracted.

Total Asset Turnover

An indicator of how efficiently a firm employs its assets to yield sales revenue.

Return on Total Assets

A profitability ratio that measures the net income produced by the total assets of a company during a period, indicating how efficiently a company uses its assets to generate earnings.