If the Yield to Maturity of All of the Following

question 28

Multiple Choice

If the yield to maturity of all of the following bonds is 6%, which will trade at the greatest premium per $100 face value?

• A) a bond with a $10,000 face value, four years to maturity and 6.2% semiannual coupon payments
• B) a bond with a $500 face value, seven years to maturity and 5.2% annual coupon payments
• C) a bond with a $5,000 face value, seven years to maturity and 5.5% annual coupon payments
• D) a bond with a $1,000 face value, five years to maturity and 6.3% annual coupon payments

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Definitions:

Investment

The allocation of resources, usually money, in the expectation of generating income or profit.

Rule Of Thumb

A practical and general principle applied to approximate or make judgments without the need for precise calculations.

Research And Development

The investigative activities a business or institution conducts to improve existing products and procedures or to lead to the development of new products and procedures.

Seed-stage Financing

Funding provided to new startups to assist in their initial development and growth phases.