A bond whose price will rise above its face value is classified as________?
Correct answer: B. Premium bond
- A. Premium face value
- B. Premium bond
- C. Premium stock
- D. Premium warrants
Explanation
When a bond’s market price rises above its face value, it trades at a premium and is called a premium bond. This usually occurs when its coupon rate is attractive compared with current market rates.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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