Which of the following statements is true? When investors' required rate of return is less than the bond's coupon rate, then market value of the bond will be greater than face value. a. O b. When investors' required rate of return exceeds the bond's coupon rate, then the market value of the bond will be greater than face value. When investors' required rate of return is less than the bond's coupon rate, then the market value of the bond will be less than face value. O d. When investors' required rate of return equals the bond's coupon rate, then the market value of the bond may be selling at face value. C.
Which of the following statements is true? When investors' required rate of return is less than the bond's coupon rate, then market value of the bond will be greater than face value. a. O b. When investors' required rate of return exceeds the bond's coupon rate, then the market value of the bond will be greater than face value. When investors' required rate of return is less than the bond's coupon rate, then the market value of the bond will be less than face value. O d. When investors' required rate of return equals the bond's coupon rate, then the market value of the bond may be selling at face value. C.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Which of the following statements is true?
When investors' required rate of return is less than the bond's coupon rate, then market value of the bond will be greater
than face value.
a.
O b.
When investors' required rate of return exceeds the bond's coupon rate, then the market value of the bond will be greater
than face value.
When investors' required rate of return is less than the bond's coupon rate, then the market value of the bond will be less
than face value.
O d.
When investors' required rate of return equals the bond's coupon rate, then the market value of the bond may be selling
at face value.
C.
Expert Solution
Step 1
The coupon rate is the fixed annual rate at which a guaranteed-income security, typically a bond, pays its holder or owner.
The face value of a bond is the price that the issuer pays at the time of maturity, also referred to as “par value.
Market value is the current price at which a financial instrument can be traded on the stock market.
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