Question

Compare the coupon rates on the following pairs of bonds assuming all else equal. A debenture...

Compare the coupon rates on the following pairs of bonds assuming all else equal. A debenture ______mortgage bond; a bond with a sinking fund ________ one without a sinking fund.

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Answer #1

The answer to the question is <,> this is because

Debentures are the most risk Investments and to compensate investors the price should be lower, given the interest rate is same, the coupon rate should be less than the market bond for making the price cheaper.

The vice versa is the case with sinking fund bond, a bond with a sinking fund provision shoule be priced more than one which doesn't have one and thus its coupon will be higher than the bond which doesn't have one

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