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A Bond with an Annual Coupon of $100 Originally Sold

Question 280

Multiple Choice

A bond with an annual coupon of $100 originally sold at par for $1,001. The current market interest rate on this bond is 9%. Assuming no change in risk, this bond would sell at a ___________ in
Order to compensate ________________________.


A) Premium; the purchaser for the above market coupon rate.
B) Discount; the purchaser for the above market coupon rate.
C) Premium; the seller for the above market coupon rate.
D) Discount; the seller for the above market coupon rate.
E) Discount; the issuer for the higher cost of borrowing.

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