The issuance of bonds to raise capital for a corporation:
A) magnifies the returns to the stockholders.
B) increases risk to the stockholders.
C) is a cheaper form of capital than the issuance of common stock.
D) all of the above.
E) none of the above.
The discount rate used to value a bond is:
A) the coupon interest rate.
B) determined by the issuing company.
C) fixed for the life of the bond.
D) the market rate of interest.
If the market price of a bond increases, then:
A) the yield to maturity decreases.
B) the coupon rate increases.
C) the yield to maturity increases.
D) none of the above.
Government bonds have lower yield to maturity than do corporate bonds of the same maturity because the ________ premium is lower for government bonds.
A) interest rate risk
B) inflation
C) default
D) maturity