1. A bond will sell at a premium when a. the coupon rate is higher than the YTM.

ID: 2737591 • Letter: 1

Question

1. A bond will sell at a premium when

a. the coupon rate is higher than the YTM.

b. the coupon rate is lower than the YTM.

c. the coupon rate is equal to the YTM.

d. the coupon rate is greater than the inflation rate.

e. the bond does not pay coupons.

2. Which of the following is an example of systematic risk?

A. Brazilian oil workers go on strike.

B. The national trade deficit is higher than expected.

C. Intel announces record earnings.

D. Ford recalls some of its cars.

E. IBM posted lower than expected earnings.

A. Brazilian oil workers go on strike.

B. The national trade deficit is higher than expected.

C. Intel announces record earnings.

D. Ford recalls some of its cars.

E. IBM posted lower than expected earnings.

Answer:1 a. the coupon rate is higher than the YTM.

Because Bonds will trade at a discount if its coupon rate is less than its yield to maturity and vice versa.

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