Question

Which statement or statements apply to a bond which is selling at a premium?

1. The market value exceeds the par value.
II. The selling rate is above 100.
III. It is sold by corporations, not by the government.
a I and II
b I only
C III only
d. I, II, and III
Please select the best answer from the choices provided
Ο Α
ОВ
С
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Answer 1

A

Explanation:

Answer 2

The best option is:

(a) I and II only

Explanation:

Each kind of bond has a face value, usually known as par value. If a bond sells above the par value, it is a premium bond, if it sells below the par value, it is a discount bond. Hence first statement is true.

If a bond has a selling rate of 100, it means it is selling at its par value. For example if a bond has a par value of $100, then a selling rate of 100 means it sells at 100$, a selling rate of 90 means it sell at 90$, a selling rate of 120 means it sells at $120. For a premium bond, the selling rate is always above 100. Hence second statement is true.

Premium bonds are mostly sold by corporations, but alot of scheme of trading premium bonds have also been introduced by governments all around the world. We can say that the statement can be true for some specific country, but globally speaking, the statement is false.