Given the Bond Described Above, If Interest Were Paid Semi-Annually

question 11

Multiple Choice

Given the bond described above, if interest were paid semi-annually (rather than annually) and the bond continued to be priced at $917.99, the resulting effective annual yield to maturity would be

• A)less than 10%.
• B)more than 10%.
• C)10%.
• D)Cannot be determined.

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Definitions:

Deferred Gross Profit

The portion of gross profit that is earned but not yet recognized, often in installment sales.

Current Liability

A company's debts or obligations that are due within one year, including accounts payable, short-term loans, and other short-term financial obligations.

Deposit Method

An accounting method used when revenue cannot be recognized because the fundamental earnings process is not considered complete.

Cost Recovery Method

An accounting method where revenues are not recognized until all costs have been recovered.