A Company Issues 12%, 10-Year $1,000 Bonds Paying Interest Semiannually

question 68

Multiple Choice

A company issues 12%, 10-year $1,000 bonds paying interest semiannually. Required return for bonds of this risk is 15%. At what price will the bond be sold (pick closest answer) ?

• A)$663
• B)$849
• C)$847
• D)$894

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Definitions:

Net Operating Income

Income from a company's everyday business operations, excluding expenses from interest and taxes.

Monthly Sales

The total revenue generated from the sale of goods or services within a single month.

Advertising Budget

The amount of money a company decides to allocate towards advertising its products or brand over a certain period.

Margin Of Safety

The difference between actual or projected sales and the break-even point, indicating the level of risk in a business.