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Which of the given statements are true?

(A) Coupon rate is the annual interest rate paid by the bond issuer to the bond holder.

(B) Bonds can only be issued by government entities.

(C) A sinking fund is a fixed term account.

(D) If discount rate = coupon rate for a bond, then present value of the bond= face value of the bond

Choose the correct answer from the options given below:

Solution

✅ Correct Option: 3

(A) states the definition of coupon rate, and (D) is true because discounting the cash flows at a rate equal to the coupon rate returns the face value.

(C) is true, since a sinking fund is built up over a fixed term to meet a known future liability. (B) is false, as corporations and municipalities also issue bonds.

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