If a Bond's Coupon Rate Is Equal to the Market

question 27

Multiple Choice

If a bond's coupon rate is equal to the market rate of interest, then the bond will sell:

• A) at a price equal to its face value.
• B) at a price greater than its face value.
• C) at a price less than its face value.
• D) None of the above is true.

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Definitions:

Credit Policy

The guidelines a company follows to determine the amount and terms of credit to extend to customers.

ACP

Average Collection Period, a metric that measures the average number of days it takes for a company to collect its accounts receivable.

Processing Float

The time lag between when a check is written and when it is actually deducted from the payer's account, affecting the available balance.

Check Clearing

The process by which banks exchange checks and other negotiable instruments drawn on each other and settle their mutual debts and credits.