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Questions and Answers
Which of the following best describes bond valuation?
Which of the following best describes bond valuation?
- The process of estimating the intrinsic worth of a bond (correct)
- The process of determining the market price of a bond
- The process of calculating the yield of a bond
- The process of determining the coupon rate of a bond
What is the theoretical fair value of a bond based on?
What is the theoretical fair value of a bond based on?
- The maturity date of the bond
- The coupon rate of the bond
- The market price of similar bonds
- The expected cash flows of the bond (correct)
How is the value of a bond calculated?
How is the value of a bond calculated?
- By adding the bond's expected cash flows to the discount rate
- By discounting the bond's expected cash flows to the present (correct)
- By discounting the bond's expected cash flows to the future
- By multiplying the bond's expected cash flows by the discount rate
What does it mean if a bond is selling at a discount?
What does it mean if a bond is selling at a discount?
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