The type of bond for which the bonds present value is greater than bonds face value is classified as ____________?
Correct answer: D. premium bondGet Corporate Bonds
- A. coupon bond
- B. interest bonds
- C. discount bond
- D. premium bondGet Corporate Bonds
Explanation
When a bond's present value exceeds its face value, its coupon rate is higher than the market's required return, so investors pay a premium for it. This is therefore a premium bond rather than a discount bond.
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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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