Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

11. Long Term Liabilities

Introduction to Bonds and Bond Characteristics

Financial Accounting

11. Long Term Liabilities

Introduction to Bonds and Bond Characteristics

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Multiple Choice

Which of the following characteristics designates a premium bond?

The bond's market price is lower than its face (par) value.

The bond's market price is higher than its face (par) value.

The bond's coupon rate is less than the market interest rate.

The bond pays no periodic interest payments.

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Verified step by step guidance

Understand the concept of a premium bond: A premium bond is one where the bond's market price is higher than its face (par) value. This typically occurs when the bond's coupon rate (interest rate paid by the bond) is higher than the prevailing market interest rate.

Analyze the given options: Evaluate each statement to determine which aligns with the definition of a premium bond.

Option 1: 'The bond's market price is lower than its face (par) value.' This describes a discount bond, not a premium bond, so it is incorrect.

Option 2: 'The bond's market price is higher than its face (par) value.' This matches the definition of a premium bond, so it is correct.

Option 3: 'The bond's coupon rate is less than the market interest rate.' This scenario leads to a discount bond, not a premium bond, so it is incorrect. Option 4: 'The bond pays no periodic interest payments.' This describes a zero-coupon bond, not a premium bond, so it is incorrect.