The Market Value of a Bond Is the Sum of the Present

question 38

Multiple Choice

The market value of a bond is the sum of the present value of future interest payments and the present value of the amount to be repaid at maturity, discounted at:

• A)the market rate.
• B)the coupon rate.
• C)the dividend rate.
• D)the prime rate.

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Definitions:

Privity of Contract

A legal concept stating that only the parties to a contract have the right to sue each other to enforce the terms of that contract.

Supreme Court Decision

A ruling issued by the Supreme Court, which is the highest court in many countries, setting a legal precedent.

Trust

A provision in equity whereby one person transfers property to a second person obligated to use it to the benefit of a third person.

Involuntary Assignment

Assignment of rights that takes place involuntarily, as in the cases of death and bankruptcy.