Question

1. Which of the following items will NOT be included in the bond indenture? a. The...

1. Which of the following items will NOT be included in the bond indenture?

a. The maturity length of the bond

b. The coupon rate of the bond

c. An options attached to the bond

d. The yield to maturitof of the band

2. You see that a corporate bond is selling for $1,083 Which of the following must be true?

The coupon rate on the bond is less than the current required yield to maturity

This bond is a discount bond

The coupon rate on the bond is greater than the current required yield maturity

This bond is a senior bond

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Homework Answers

Answer #1

1.d.The yield to maturity of the bond.

The yield to maturity of the bond is not mentioned on the bond indenture.

The following will be included in the bond indenture;

The maturity of the bond.

The coupon rate of the bond.

The options of the bond etc.

2.C.The coupon rate on the bond is greater than the current required yield to maturity.

If the price of the bond is greater than the face value ($1000) of the bond, it will be mainly because the required return on the bond is lower than the coupon rate.

The discount bond is a bond which will sell at a price lower than the face value.

Senior bond is one which is one with highest priority during the winding up of the company.

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