If a Bond Is a Par Bond, Then

question 43

Multiple Choice

If a bond is a par bond, then:

• A) the yield to maturity is less than the coupon rate.
• B) the yield to maturity is greater than the coupon rate.
• C) the yield to maturity is equal to the coupon rate.
• D) its duration must be greater than its maturity.
• E) its duration must be equal to its maturity.

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Definitions:

Marginal Cost

The additional cost incurred from producing one more unit of a good or service.

Moral Hazard

The situation where one party in an agreement is tempted to take undue risks because the negative consequences of the risk will be suffered by the other party.

Efficient Level

The optimal point of production or operation where costs are minimized and productivity or utility is maximized.

Warranty

A guarantee, usually made by a seller to a buyer, promising to repair or replace a product if necessary within a specified period.