An Analyst Is Considering the Purchase of a Government of Canada

question 29

Multiple Choice

An analyst is considering the purchase of a Government of Canada bond that will pay its face value of $10 000 in one year's time,but pay no direct interest.The market interest rate is 4% and the bond is being offered for sale at a price of $9400.The analyst should recommend

• A)purchasing the bond because the purchase price is more than its present value and is therefore profitable.
• B)purchasing the bond because the purchase price is less than its present value and is therefore profitable.
• C)not purchasing the bond because the buyer could earn an additional $224 by investing the $9400 elsewhere.
• D)not purchasing the bond because the buyer could earn an additional $376 by investing the $9400 elsewhere.
• E)not purchasing the bond because the purchase price is less than its present value.

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Definitions:

Construct an Argument

The process of creating a structured and logical series of statements aimed at demonstrating the truth of a specific position or idea.

Opposing Argument

A viewpoint or statement that contradicts or challenges another position or argument in a debate or discussion.

Interrelationships

The way in which two or more concepts, objects, or people are connected, related, or interconnected.

Free-Choice Question

A type of question that allows the respondent to answer in an open-ended format, providing personal insights or opinions without being restricted to predefined options.