객관식
Which of the following variables are required to calculate the value of a bond?
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11. Long Term Liabilities
Introduction to Bonds and Bond Characteristics
Multiple Choice
Which of the following characteristics designates a premium bond?
A
The bond's market price is lower than its face (par) value.
B
The bond's market price is higher than its face (par) value.
C
The bond's coupon rate is less than the market interest rate.
D
The bond pays no periodic interest payments.
검증된 단계별 안내1
Understand the concept of a premium bond: A premium bond is one where the bond's market price is higher than its face (par) value. This typically occurs when the bond's coupon rate (interest rate paid by the bond) is higher than the prevailing market interest rate.
Analyze the given options: Evaluate each statement to determine which aligns with the definition of a premium bond.
Option 1: 'The bond's market price is lower than its face (par) value.' This describes a discount bond, not a premium bond, so it is incorrect.
Option 2: 'The bond's market price is higher than its face (par) value.' This matches the definition of a premium bond, so it is correct.
Option 3: 'The bond's coupon rate is less than the market interest rate.' This scenario leads to a discount bond, not a premium bond, so it is incorrect. Option 4: 'The bond pays no periodic interest payments.' This describes a zero-coupon bond, not a premium bond, so it is incorrect.
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