If a Bond's Stated Interest Rate Is Lower Than the Market

question 49

Multiple Choice

If a bond's stated interest rate is lower than the market rate,which of the following is true?

• A)The bond will be issued at a premium.
• B)The bond will be issued at par.
• C)The bond will be issued at a discount.
• D)The bond will be issued for an amount higher than the maturity value.

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Definitions:

Common Shares

Equity securities that signify ownership in a corporation and entitle the holder to a vote at shareholders' meetings and to receive dividends.

Preferred Shares

A class of ownership in a corporation that has a higher claim on its assets and earnings than common shares, often paid dividends before common shareholders.

Treasury Shares

Previously outstanding shares repurchased by a corporation that are not canceled or restored to unissued status.

Repurchased Shares

Stocks that have been bought back by the issuing company from shareholders, reducing the amount of outstanding shares on the market.