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

question 37

Multiple Choice

A company releases a five-year bond with a face value of $1 000 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)8%
• B)4%
• C)6%
• D)3%

---

Definitions:

Activity Rates

Charges or costs associated with specific business activities, used in costing and budgeting.

Activity Levels

Various stages of business operations ranging from high to low, impacting costs and revenues.

Activity-Based Costing (ABC)

A costing method that assigns overhead and indirect costs to related products and services based on the activities that drive those costs.

Overhead Rates

The method used to allocate indirect costs to produced goods, often calculated as a ratio of overhead to direct labor hours, direct labor costs, or machine hours.