Suppose That All Investors Expect That Interest Rates for the 4

question 10

Multiple Choice

Suppose that all investors expect that interest rates for the 4 years will be as follows: What is the price of a 2-year maturity bond with a 5% coupon rate paid annually? (Par value = $1,000.)

• A)$1,092.97
• B)$1,054.24
• C)$1,028.51
• D)$1,073.34

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Definitions:

ECG Paper

Specialized grid paper used in electrocardiography to record the electrical activity of the heart over a period of time.

Depolarization

The loss of polarity, or opposite charges inside and outside; the electrical impulse that initiates a chain reaction resulting in contraction.

Electrical Impulse

A rapid, transient electrical charge that travels along the membrane of a nerve or muscle cell.

Chain Reaction

A sequence of reactions where a reactive product or by-product causes additional reactions to take place.