When a bond sells at a premium: O The contract rate is above the market rate O The contract rate is equal to the market rate O The contract rate is below the market rate O It means that the bond is a zero coupon bond The bond pays no interest
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- A premium bond is a bond that sells for less than its par value. O True False1. When the market interest rate rises, what happens to bond prices? Group of answer choices They rise They stay the same Cannot be determined They fall 2. A bond discount occurs when: Group of answer choices The price of a bond is above its face value. The price of a bond is above its maturity value. The price of a bond is below its face value. The price of the bond is equal to a bond's face value. 3. When a bond sells for a premium, Group of answer choices The price is above the face value The price is equal to the face value. The price is below the face value The price is below the maturity value. 4. A bond has a face value of $100,000 and a price of $97,000. The journal entry at the date of issuance would include: Group of answer choices A credit to Bond Discount of 3,000 A debit to Bond Discount of 97,000 A debit to Bond Discount of 3,000 A credit to Bond Premium of 3,000 5. A bond has a face…The market rate of interest for a bond issue that sells for more than its face value is a. Equal to the rate stated on the bond. b. Higher than the rate stated on the bond. c. Not dependent on the rate of the bond. d. Lower than the rate stated on the bond.
- Under what conditions will a discount bond have anegative nominal interest rate? Is it possible for a coupon bond or a perpetuity to have a negative nominalinterest rate?QUESTION 1 Under what conditions that a discount bond has a negative nominal interest rate? Is it possible for a coupon bond or perpetuity to have a negative nominal interest rate? a)Which of the following is NOT true regarding bonds? O If a bond is selling at a discount, then the current yield is greater than the yield-to-maturity. An increase in market interest rates leads to a decrease in bond prices. O If the coupon rate on a bond is lower than the yield-to-maturity, the bond sells at a discount. O If the coupon rate on a bond equals the yield-to-maturity, then the bond sells at par.
- What is a bond’s market value when the required rate of return (ie market rate) is less than the coupon rate? The bond’s market value is less than the par value. The bond’s market value is the same as the par value. The bond’s market value is greater than the par value. None of the above.It is the interest rate that the buyer will actually earn if the bond is held to maturity and there is no default. A. yield to maturity B. no choice given c. current yield d. coupon discount rate e. coupon payment rateIf the market rate of interest is greater than the contractual rate of interest, bonds will sell a. at a discount b. only after the stated rate of interest is increased c. at a premium d. at face value
- For a bond issue that sells for less than its face value, the market rate of interest is a. Higher than the rate stated on the bond. b. Dependent on the rate stated on the bond. c. Equal to the rate stated on the bond. d. Less than the rate stated on the bond.4. The following statements describe the general characteristics of price of the coupon bond. Which one is false? a. When the market interest rate falls, the bond price rises. b. The value of bond can be computed as the sum of PDV (present discount value) of all the remaining future payments associated with it. c. When the market interest rate is the same as the coupon rate, the value of bond equals the face value. d. The face value and the coupon rate are fixed for the life of the bond. None of the above are false. е.A zero coupon bond is a bond that is sold now at a discount and will pay its face value when it matures. No interest payments are made.