2000, Cola acquired at a premium, Pepsi’s 10-year bonds as a long-term investment. At December 31, 2001, Cola’s bonds were quoted at a small discount. Which of the following situations is the most likely cause of the decline in the bond’s market value? a. Pepsi issued a stock dividend. b. Pepsi is expected to call the
2000, Cola acquired at a premium, Pepsi’s 10-year bonds as a long-term investment. At December 31, 2001, Cola’s bonds were quoted at a small discount. Which of the following situations is the most likely cause of the decline in the bond’s market value? a. Pepsi issued a stock dividend. b. Pepsi is expected to call the
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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In 2000, Cola acquired at a premium, Pepsi’s 10-year bonds as a long-term investment. At December 31, 2001, Cola’s bonds were quoted at a small discount. Which of the following situations is the most likely cause of the decline in the bond’s market value?
a. Pepsi issued a stock dividend.
b. Pepsi is expected to call the bonds at a premium, which is less than Cola’s carrying amount.
c. Interest rates have declined since Cola purchased the bonds.
d. Interest rates have increased since Cola purchased the bonds.
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