Last year, Lexington Homes issued $1 million in unsecured, noncallable debt. This debt pays an annual interest payment of $55 and matures six years from now. The face value is $1,000 and the market price is $1,020. Which one of these terms correctly describes a feature of this debt?

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A note is a type of debt security that has a maturity of less than 10 years. In this case, the debt issued by Lexington Homes has a maturity of six years, which makes it a note. The fact that it is unsecured and noncallable means that there is no collateral backing the debt and the issuer cannot call back the debt before the maturity date. The $55 annual interest payment implies a semiannual coupon rate of 5.5% ($55/$1,000), but the question does not specify whether the coupon is paid semiannually or annually. The fact that the market price is higher than the face value implies that the bond is trading at a premium, notat a discount. There is no mention of any trust deed or collateralized feature.

Last Year, Lexington Homes Issued $1 Million in Unsecured, Noncallable