A $100 Bond, Which Matures in One Year, Has a Price

question 134

Multiple Choice

A $100 bond, which matures in one year, has a price of $75. The interest rate on this bond is

• A) 20%.
• B) 25%.
• C) 33 1/3%.
• D) 50%.

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Definitions:

Weighted Average Cost

A method used to calculate the average cost of goods available for sale, which is weighted by the quantity of goods at each purchase price.

Source of Funds

Refers to the origins of the capital or money a company uses for its operations or investments.

Cost of Capital

A metric used to determine the minimum expected return needed on an investment in order to be deemed a worthwhile expenditure, reflecting the investor's required return.

Systematic Risk

The inherent risk associated with the entire market or market segment, which cannot be eliminated by diversification.