A premium bond is defined as a bond that: Multiple Choice A) has a duration that is less than 1.0. B) has a face value that exceeds its market value. C) is callable at a price which exceeds the face value. D) has a market price that exceeds par value. E) is selling for less than face value.

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Osvaldo

10 April, 04:50

A premium bond is defined as a bond that: Multiple Choice A) has a duration that is less than 1.0. B) has a face value that exceeds its market value. C) is callable at a price which exceeds the face value. D) has a market price that exceeds par value. E) is selling for less than face value.

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Ulises · Answer 1

D) has a market price that exceeds par value

Explanation:

Option A, incorrect, because duration is not less than 1 always and here duration might be less than or equal to maturity.

Option B, incorrect, the face value is less than market value in premium bond.

Option C, incorrect, because a premium bond could be non callable

Option D, correct, because market value of of bond is higher than par value on premium bond.

Option E, correct, it is a discount bond when price is less than par value