If coupon rate is equal to going rate of interest, then bond will be sold________?
Correct answer: A. At par value
- A. At par value
- B. Below its par value
- C. More than its par value
- D. Seasoned par value
Explanation
When the coupon rate equals the prevailing market interest rate, the bond offers exactly the return investors require and therefore sells at its face, or par, value. A higher market rate would push it below par, while a lower rate would push it above par.
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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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