What Is the Yield on a Very Long-Term Bond with a $500

question 73

Multiple Choice

What is the yield on a very long-term bond with a $500 face value, a coupon of $35, and a current price of $650?

• A)37 percent
• B)35 percent
• C)5.4 percent
• D)7 percent
• E)17.7 percent

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Definitions:

Straight-Line Method

A method of depreciation where an asset's cost is evenly reduced over its useful life.

Market Interest Rate

Market Interest Rate refers to the prevailing rate at which interest is paid by borrowers for loans or earned by investors in the market.

Stated Interest Rate

The annual interest rate declared on a financial instrument, such as a loan or bond, not adjusting for compounding or market conditions.

Capital Lease

A leasing arrangement in which the lessee assumes some risks and benefits of ownership of the asset being leased.