1. What is the primary difference between the book value and the market value of an asset?
2. Describe the relationship between the coupon rate and the required rate of return that will result in a bond selling at
a. A discount
b. Par value
c. A premium
3. How does the yield to maturity on a bond differ from the coupon yield or current yield?
4. Under what conditions will a bond's current yield be equal to its yield to maturity?
5. In what ways is preferred stock similar to long-term debt? In what ways is it sim- ilar to common stock?
6. Explain why bondholders often prefer a sinking fund provision in a bond issue.
7. Explain what is meant by interest rate risk.