Learning Objective 7-4
1) A bond is ________.
A) debt sold to investors
B) long-term debt until the year it matures
C) an agreement, which requires a company to repay principal plus interest
D) all of these
2) When a bond sells for par value, its stated interest rate is ________.
A) equal to the market rate of interest
B) greater than the market rate of interest
C) less than the market rate of interest
D) irrelevant to investors
3) When a bond sells at a discount, its stated interest rate is ________.
A) equal to the market rate of interest
B) greater than the market rate of interest
C) less than the market rate of interest
D) irrelevant to investors
4) When a bond sells at a premium, its stated interest rate is ________.
A) equal to the market rate of interest
B) greater than the market rate of interest
C) less than the market rate of interest
D) irrelevant to investors
5) When a bond sells at its face amount, the market rate of interest is ________.
A) equal to the bond’s stated rate of interest
B) greater than the bond’s stated rate of interest
C) less than the bond’s stated rate of interest
D) irrelevant to investors
6) When a bond sells at less than its face amount, the market rate of interest is ________.
A) equal to the bond’s stated rate of interest
B) greater than the bond’s stated rate of interest
C) less than the bond’s stated rate of interest
D) irrelevant to investors
7) When a bond sells at more than its face amount, the market rate of interest is ________.
A) equal to the bond’s stated rate of interest
B) greater than the bond’s stated rate of interest
C) less than the bond’s stated rate of interest
D) irrelevant to investors
8) When a bond sells for 101, the bond is selling at ________.
A) a discount
B) a premium
C) par
D) face value
9) When a bond sells for 102, the bond is selling at ________.
A) a discount
B) a premium
C) par
D) face value
10) When a bond sells for 103, the bond is selling at ________.
A) a discount
B) a premium
C) par
D) face value