On May 5,2015,Bennix Sold $1,000,000 of Five-Year,3% Bonds for $900,500

question 27

Multiple Choice

On May 5,2015,Bennix sold $1,000,000 of five-year,3% bonds for $900,500. From the proceeds,the company paid fees of 100,000.Interest is payable semi-annually on May 5 and November 5.What is the effective rate of interest to 2 decimal places?

• A)3.00%
• B)3.72 %
• C)3.96%
• D)6.27%

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Definitions:

Real Option

A choice available to companies involving business decisions on investments, which use the concept of option valuation in financial markets.

Scenario Analysis

A process of analyzing future events by considering alternative possible outcomes (scenarios), often used in the assessment of risk or strategic planning.

NPV

Net Present Value, a calculation used to estimate the profitability of an investment or project by summing the present values of all expected future cash flows.

Probability

The measure of the likelihood that an event will occur, expressed as a number between 0 and 1, where 1 indicates certainty.