Which of the following statements is FALSE?ABond is a liability for issuer and an asset for holder.BBy convention the coupon rate is expressed as an effective annual rate.CBonds typically make two types of payments to their holders.DThe time remaining until the repayment date is known as the term of the bond.SUBMIT
Question
Which of the following statements is FALSE?ABond is a liability for issuer and an asset for holder.BBy convention the coupon rate is expressed as an effective annual rate.CBonds typically make two types of payments to their holders.DThe time remaining until the repayment date is known as the term of the bond.SUBMIT
Solution
The false statement is B: "By convention the coupon rate is expressed as an effective annual rate."
In reality, the coupon rate of a bond is typically expressed as a nominal annual rate, not an effective annual rate. The coupon rate is the annual interest rate the issuer will pay on the face value of the bond.
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