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FINRA Series 7

Category - Series 7

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An excerpt from a recent tombstone ad reveals bonds offered publicly at 101. Why were they priced at a premium?

to enable investors to establish a tax loss when the bonds are redeemed at maturity
to reflect prevailing credit ratings and market conditions for the issuer
to provide the issuer with a larger deduction from pre-tax earnings for higher than usual interest payments
to comply with SEC rules mandating such pricing for debt issues maturing in the year 2000 and thereafter

Explanation

Answer: B - to reflect prevailing credit ratings and market conditions for the issuer. Premiums or discounts are used in bond offerings to bring the yield in line with current market conditions.

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FINRA Series 7

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FINRA Series 7

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