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What happens when a bond expected cash flows are discounted

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Reference no: EM132809362

Problem 1: The market risk premium is the:

a. Risk-free rate

b. Market rate of return

c. Difference between the rate of return on an asset and the risk-free rate

d. Difference between the rate of return on the market portfolio and the risk-free rate

Problem 2: What happens when a bond's expected cash flows are discounted at a rate lower than the bond's coupon rate?

a. The coupon rate of the bond increases

b. The price of the bond increases

c.The coupon payments will be adjusted to the new discount rate

d. The par value of the bond decreases

Reference no: EM132809362

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