A Company Releases a Five-Year Bond with a Face Value

question 93

Multiple Choice

A company releases a five-year bond with a face value of $1000 and coupons paid semiannually. If market interest rates imply a YTM of 8%, which of the following coupon rates will cause the bond to be issued at a premium?

• A) 7%
• B) 6%
• C) 8%
• D) 10%

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Definitions:

Secular Trend

A pattern in which the average age of puberty in developed countries declines across decades.

Growth Hormone

A protein hormone secreted by the pituitary gland that stimulates growth, cell reproduction, and regeneration in humans and other animals.

Hypothalamus

A region of the brain that regulates many bodily functions, including hunger, thirst, temperature, and the release of hormones.

Pituitary

A small gland at the base of the brain that regulates growth, metabolism, and the function of other glands in the endocrine system.