Given the Information Below, Which Bond(s) Will Be Issued at a Discount

question 112

Multiple Choice

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

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

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Definitions:

Active Management

An investment strategy where a manager makes specific investments with the goal of outperforming an investment benchmark index.

Security Analysis

The evaluation of financial instruments (such as stocks, bonds) to determine their value and potential for return on investment.

Index Fund

A collective investment scheme designed to follow certain preset rules so that the fund can track a specified basket of underlying investments.

Market Representation

The degree to which a statistical sample or a financial index accurately reflects the broader market or sector it aims to represent.