Use the following exhibit for questions $$\begin{array} { l l l l l }
\frac { \text { Bonds } } { \text { Bombardier } } & \frac { \text { Coupon } } { 7.350 } & \frac { \text { Maturity Date } } { \text { Dec. } 22 / 26 } & \frac { \text { Bid } \$ } { 103.12 } & \frac { \text { Yield } \% } { 6.35 }
\end{array}$$
-The contractual interest rate of the Bombardier bonds is
A) less than the market rate of interest.
B) greater than the market rate of interest.
C) equal to the market rate of interest.
D) not determinable.

Question

Use the following exhibit for questions $$\begin{array} { l l l l l } 
\frac { \text { Bonds } } { \text { Bombardier } } & \frac { \text { Coupon } } { 7.350 } & \frac { \text { Maturity Date } } { \text { Dec. } 22 / 26 } & \frac { \text { Bid } \$ } { 103.12 } & \frac { \text { Yield } \% } { 6.35 }
\end{array}$$
-The contractual interest rate of the Bombardier bonds is
A) less than the market rate of interest.
B) greater than the market rate of interest.
C) equal to the market rate of interest.
D) not determinable.

Quizplus · Accepted Answer

The contractual interest rate (coupon rate) of the Bombardier bonds is 7.350%, which is higher than the yield to maturity (market interest rate) of 6.35%. This indicates that the bonds were issued at a rate higher than the current market rate, leading to their trading above par value (indicated by a bid price of 103.12).

Use the Following Exhibit for Questions -The Contractual Interest Rate of the Bombardier Bonds Is A)

Use the Following Exhibit for Questions -The Contractual Interest Rate of the Bombardier Bonds Is
A)