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Generic Pharmaceuticals (GP) previously sold $1000-par-value bonds with a 6% annual coupon, paid semi-annually, due in exactly 8 years. The price of these bonds is presently $1,211.97. Which of the following statements is inaccurate?

a. Investors holding GP bonds bear interest rate risk.

b. Interest rates have fallen since GP sold these bonds to the public.

c. If GP management now wishes to sell $1000-par-value, 8-year bonds paying interest semi-annually, it must set an (annual) coupon rate of 1.5% to make each bond sell for a price of $1,000.

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Trinidad Tremblay
Trinidad TremblayLv2
28 Sep 2019

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