Question
Answer all multiple-choice questions by clearly marking your answer. Assume all bonds are semi-annual pay, have whole years to maturity, and have face (or principal
Answer all multiple-choice questions by clearly marking your answer. Assume all bonds are semi-annual pay, have whole years to maturity, and have face (or principal values) of $1000.
2. You have been offered a corporate bond trading at 112.75. If the face value of the bond is $1000, what can you assume has happened since the bond was first issued?
a. Interest rates rose, and the price of the bond decreased creating a discount.
b. Interest rates rose, and the price of the bond increased creating a premium.
c. Interest rates declined, and the price of the bond increased creating a premium.
d. Interest rates declined, and the price of the bond declined creating a discount.
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