Question #s7-prep2-s7-q-246Function 3Fundamental

Bond Pricing

A bond with a 4% coupon is trading at 95. This bond is selling at:

Correct Choice: C

Discount bonds: Coupon rate < market rate. Premium bonds: Coupon rate > market rate.

Complete Analysis & Legal Rationale

A price of 95 means 95% of par value ($950 for a $1,000 bond). Since this is below par (100), the bond trades at a DISCOUNT. This occurs when market rates exceed the coupon rate.

Distractor Autopsy (Why Other Options Are Traps)

FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:

Choice AIncorrect

Concept Trap

Par is 100, not 95.

Choice BIncorrect

Concept Trap

A premium would be above 100.

Choice CCorrect

None

Matches the verified teaching point in the explanation.

Choice DIncorrect

Concept Trap

NAV is for mutual funds, not individual bonds.

Authorities & References:

Official Standard: Outline-level citation pending rule-specific upgrade. Verify against current FINRA Series 7 outline.

Official SourceFINRA FINRA Series 7 Content Outline — General Securities Representative Examination (Series 7) Content Outline

Bond Pricing

Complete Analysis & Legal Rationale

Distractor Autopsy (Why Other Options Are Traps)

Regulatory Authority & Citations: Primary Legal Sources

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