Question

If the market price of a bond exceeds its face amount: A. the coupon rate is less than the market interest rate. B. the coupon rate is more than the market interest rate. C. the company's ROI and working capital have been increasing over time. D. the maturity rate has been declining.

Answer 1

A. the coupon rate is less than the market interest rate.

Step-by-step explanation:

• Bonds that offer a lower coupon rate generally tend to have a higher interest rate risks than those which are similar to the bonds that offer a higher coupon rate.

• If the market interest rates rise, then the price of the bonds with the 2% interest coupon rate and will fall more than the bond with a rate of 4%. As the face amount is the money that is held in bonds for example as the bond certificate.