Bond Trading Below Par

Question

1. Which of the following statements is FALSE?

A. Zero-coupon bonds are also called pure discount bonds.
B. The internal rate of return (IRR) of an investment opportunity is the discount rate at which the net present value (NPV) of the investment opportunity is equal to zero.
C. The yield to maturity for a zero-coupon bond is the return you will earn as an investor from holding the bond to maturity and receiving the promised face value payment.
D. When prices are quoted in the bond market, they are conventionally quoted in increments of $1000.

2. A bond is currently trading below par. Which of the following must be true about that bond?

A. The bond’s yield to maturity is less than its coupon rate.
B. The bond is a zero-coupon bond.
C. The bond’s yield to maturity is greater than its coupon rate.
D. B and C above.

Summary

These short questions belong to Finance. Both the questions are about finding true and false statements.

Total Word Count NA

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