Given the Information Below,which Bond(s)will Be Issued at a Discount

question 23

Multiple Choice

Given the information below,which bond(s) will be issued at a discount?
$$\begin{array} { | l | c | c | c | c | } \hline & \text { Bond 1 } & \underline { \text { Bond 2 } } & \underline { \text { Bond 3 } } & \underline { \text { Bond 4 } } \\\hline \text { Stated Rate of Return } & 5 \% & 7 \% & 12 \% & 10 \% \\\hline \text { Market Rate of Return } & 7 \% & 8 \% & 12 \% & 9 \% \\\hline\end{array}$$

• A)Bond 1
• B)Bond 2
• C)Bond 4
• D)Bonds 1 and 2

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Definitions:

Immunization

A strategy in fixed-income portfolio management to shield the portfolio's value from interest rate movements.

Duration

A measure of the sensitivity of the price of a bond or other fixed-income investment to changes in interest rates, often used to assess risk.

Interest-Rate Change

A fluctuation in the cost of borrowing or the return on savings, which can significantly impact financial markets and economic conditions.

Term to Maturity

The duration of time until the final repayment date of a loan, bond, or other financial instrument.