Use the Following Information to Determine the Margin of Safety

question 14

Multiple Choice

Use the following information to determine the margin of safety in dollars:

• A)$88,500.
• B)$108,500.
• C)$173,600.
• D)$326,400.
• E)$500,000.

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Definitions:

Par Value

The face value of a bond or the stock value stated in the corporate charter, not necessarily reflecting the market value.

Coupon Bond

A type of bond that offers periodic interest payments to its holder, typically paid semi-annually, until maturity.

Duration

Duration is a measure of the sensitivity of the price of a financial asset to a change in interest rates, often used in the context of bonds to describe how price is affected by changes in rates.

Annual Coupon

The yearly interest payment paid to bondholders, typically expressed as a fixed percentage of the bond's face value.