Which of the following statements correctly describes the relationship between a long-term bond’s market value, its coupon rate and the relevant yield to maturity? A. When bonds are initially issued, the coupon rate is generally set equal to the required yield to maturity so that the company can issue the bonds at their face value. B. If at any point in the bond’s life its coupon rate is less than the market determined yield to maturity, its market value at that time will be less than the face value of the bond. C. More than one of the other statements are correct D. A government bond with a fixed coupon rate may be valued below its’ face value even though the promised cash flows are effectively riskless. E. None of the other statements are correct
Which of the following statements correctly describes the relationship between a long-term bond’s market value, its coupon rate and the relevant yield to maturity? A. When bonds are initially issued, the coupon rate is generally set equal to the required yield to maturity so that the company can issue the bonds at their face value. B. If at any point in the bond’s life its coupon rate is less than the market determined yield to maturity, its market value at that time will be less than the face value of the bond. C. More than one of the other statements are correct D. A government bond with a fixed coupon rate may be valued below its’ face value even though the promised cash flows are effectively riskless. E. None of the other statements are correct
Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN:9781285595047
Author:Weil
Publisher:Weil
Chapter11: Notes, Bonds, And Leases
Section: Chapter Questions
Problem 6Q
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Which of the following statements correctly describes the relationship between a long-term bond’s market value, its coupon rate and the relevant yield to maturity?
A. When bonds are initially issued, the coupon rate is generally set equal to the required yield to maturity so that the company can issue the bonds at their face value.
B. If at any point in the bond’s life its coupon rate is less than the market determined yield to maturity, its market value at that time will be less than the face value of the bond.
C. More than one of the other statements are correct
D. A government bond with a fixed coupon rate may be valued below its’ face value even though the promised cash flows are effectively riskless.
E. None of the other statements are correct
Is "B" is the correct answer?
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