CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

For a bond issue that sells for more than the face amount of the bonds, the market rate of interest is ______

A. less than the interest rate stated in the bond indenture.
B. the same as the interest rate stated in the bond indenture.
C. determined using the interest rate stated in the bond indenture.
Correct Answer: A

A bond will sell at a premium (for more than the face amount of the bonds) when the market rate of interest is lower than the stated interest rate, due to demand for the bonds from investors.

User Contributed Comments 2

User Comment
achu Think about what happens to bond prices when interest rates change. Bond values increase when rates fall, BVs decrease when interest rates rise.
Freddie33 What's bond indenture?
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