Which of the following statements is FALSE? 1-The "clean price" of a bond is always less...
Which of the following statements is FALSE?
1-The "clean price" of a bond is always less than or equal to the "dirty price".
2- A "Sinking Fund Provision" requires the firm to repay the entire issue at one time.
3- A cap on the interest rate for floaters is an example of an embedded option in a bond.
4- In a margin buying arrangement part of the purchase money is borrowed by the buyer from the broker.
Homework Answers
Statement 2 is false.
A "Sinking Fund Provision" requires the firm to repay the entire issue at one time.
Sinking fund provision requires firm to make periodically payments to trustee of bond.
1-The "clean price" of a bond is always less than or equal to the "dirty price".
True. Clean price = Dirty price - accrued interest
2- A "Sinking Fund Provision" requires the firm to repay the entire issue at one time.
False. Sinking fund provision requires firm to make periodically payments to trustee of bond.
3- A cap on the interest rate for floaters is an example of an embedded option in a bond.
True.
4- In a margin buying arrangement part of the purchase money is borrowed by the buyer from the broker.
True. Margin amount is amount borrowed from the broker
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