A $1,000 Six-Year Eurobond Has an 8 Percent Coupon, Is

question 54

Multiple Choice

A $1,000 six-year Eurobond has an 8 percent coupon, is selling at par, and contracts to make annual payments of interest.The duration of this bond is 4.99 years.What will be the new price using the duration model if interest rates increase to 8.5 percent?

• A)$23.10.
• B)$976.90.
• C)$977.23.
• D)$1,023.10.
• E)-$23.10.

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Definitions:

Expected EBIT

The projected Earnings Before Interest and Taxes, an estimate of a company's profit excluding interest and income tax expenses.

Book Value

The net value of a company's assets minus its liabilities and preferred stock, representing the value of the company according to its financial statements.

Expected Earnings

Predictions or estimates of a company's profit during a specific period in the future, often used by investors to make informed decisions.

Unlevered Cost

The cost of an investment that does not take into account the effect of financial leverage, or borrowing.