You are interested in one corporate bond that shows the following information: Face Value: $10,000 Interest Rate:
Question:
You are interested in one corporate bond that shows the following information:
Face Value: $10,000
Interest Rate: 10% (per year)
Maturity: 4 years from today
Price Index: 120
1. Please use the same information (as follows) to answer this question.
Face Value of the bond: $10,000
Interest Rate: 10% (per year)
Maturity: 4 years from today
Current Price Index: 120
Which of the following statement is wrong to explain the Price Index (120) of this bond?
Group of answer choices
a. The issuing company of this bond must be considered strong and safe financially to pay their dues on this bond.
b. This bond must be popular in the financial market demanded by many investors.
c. Investors in the financial market must consider this bond a risky opportunity.
d. Investing into this bond (=purchasing it) will bring you lower return than the original offer.
5. If a bond is traded at the price index of 120 (like the one introduced in previous questions), investors will pay a lower amount demanding higher rates of return because they consider this a risky opportunity.
True
False
6. If a bond is traded at the price index of 120 (like the one introduced in previous questions), the issuing company must pay higher amount of interest to meet with the investors' demand of higher return.
True
False
Expert Answer:
