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Study Stuff for MCA Examinations - NIMCET
Study Stuff for MCA Examinations - NIMCET
Previous Year Question (PYQs)
Which of the following statements are correct?
A. If discount rate $>$ coupon rate, then present value of a bond $>$ face value
B. An annuity in which the periodic payment begins on a fixed date and continues forever is called perpetuity
C. The issuer of bond pays interest at fixed interval at fixed rate of interest to investor is called coupon payment
D. A sinking fund is a fixed payment made by a borrower to a lender at a specific date every month to clear off the loan
E. The issuer of bond repays the principal i.e. face value of the bond to the investor at a later date termed as maturity date
Choose the correct answer from the options given below:
Solution
A. If discount rate $>$ coupon rate, bond sells at discount
So present value $<$ face value ❌ False
B. Payment continues forever → Perpetuity ✔ True
C. Fixed periodic interest paid by issuer → Coupon payment ✔ True
D. Sinking fund is periodic deposit to accumulate money, not direct monthly loan repayment ❌ False
E. Principal repaid at maturity date ✔ True
Correct statements: B, C, E
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