Question: When pricing bonds, if a bond's coupon rate is less than the required rate of return, then: Select one: a. The bond sells at a

When pricing bonds, if a bond's coupon rate is less than the required rate of return, then:

Select one:

a. The bond sells at a premium if it has a long maturity, a discount if it has a short maturity.

b. The holder of the bond is assured of a profit regardless of when the bond is eventually sold.

c. The holder of the bond will realize a capital gain if the bond is held to maturity.

d. The bond sells at par because the required rate of return is adjusted to reflect the discrepancy. e. The bond sells at a discount if it has a long maturity, a premium if it has a short maturity.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Do Prob 10.8-5. The Lockhead Aircraft Co. is ready to begin a project to develop a new fighter airplane for the U.S. Air Force. The companys contract with the Department of Defense calls for project...

(a) James is a broker from YTL Ltd. plans to buy bonds from Axiata and Maxis. Axiata Bond has coupon rate 10 percent paid semiannually, required rate of return 8 percent and 6 years of maturity...

James is a broker from YTL Ltd. plans to buy bonds from Axiata and Maxis. Axiata Bond has coupon rate 10 percent paid semiannually, required rate of return 8 percent and 6 years of maturity while,...

a) Lewis is considering purchase of five- year Tshs 50,000 value bond carrying coupon rate of 7% p.a. Lewis required rate of return is 8% p.a. Determine the amount that Lewis can pay now to purchase...

If the coupon rate is less than (-) the required rate of return, then a bond is selling at A Par Value B A Discount A premium D) None of the above

A company issued a 15- year bonds with par value of P1,000 each bond. The coupon rate is 14%. The investor's required rate of return is 10%. Required: Compute for the interest that the company pays...

A company issued a 15-year bonds with par value of P1,000 each bond. The coupon rate is 14%. The investors' required rate of return is 10%. Required: Compute for the interest that the company pays...

Exam 2 Q1. Biff deposited $9,000 in a bank account, and 10 years later he closes out the account, which is worth $18,000. What is the annual interest rate over the 10 years? a. 6.45% b. 7.18% c....

Q1. Biff deposited $9,000 in a bank account, and 10 years later he closes out the account, which is worth $18,000. What is the annual interest rate over the 10 years? a. 6.45% b. 7.18% c. 9.10% d....

QUESTION 1 Which of the following is the correct relationship between interest rates and bond prices? When bond prices go up interest rates go downWhen interest rates go up bond prices go upWhen bond...

1 3 . 5 0 % . Again, assume that the bond pays semiannual interest payments and has three years to maturity. If you round the bond's intrinsic value to the nearest whole doilar, then its intrinsic...

If a brand is using a product differentiation positioning strategy, what will the advertising message focus on? Provide an example of this strategy not mentioned in the chapter.

The following is a list of statements about deterministic finite automata and regular languages. Select all statements from below that are true. Suppose language Lis regular. If a DFA M recognizes L,...

The measure of how closely the returns of two investments move together is called the correlation standard deviation variance risk factor coefficient

Draw a class diagram and its relationship based on the following statements. You can use any UML tool/software to represent your class diagram. Do NOT copy and paste your diagram, use the attachment...