Consider a Bond That Pays Annually an 8% Coupon with 20

question 54

Multiple Choice

Consider a bond that pays annually an 8% coupon with 20 years to maturity.The amount that the price of the bond will change if its yield to maturity increases from 5% to 7% is closest to:

• A)-$270.
• B)-$225.
• C)-$310.
• D)-$250.

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Definitions:

Target Costing

A pricing method where the selling price is set first, and then the target cost for producing the product is determined by subtracting a desired profit margin.

Desired Return

The specific profit that an investor aims to achieve from an investment.

Investment

The allocation of resources, such as time, money, or effort, in something with the expectation of receiving a future return or profit.

Traceable Fixed Expense

Fixed costs that can be directly linked to a specific business center or segment.