Consider a Zero-Coupon Bond with a $1000 Face Value and 10

question 6

Multiple Choice

Consider a zero-coupon bond with a $1000 face value and 10 years left until maturity.If the YTM of this bond is 10.4%,then the price of this bond is closest to:

• A)$1000.
• B)$602.
• C)$1040.
• D)$372.

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Definitions:

Market Equilibrium

A condition or state in an economy where supply and demand are equal, leading to stable prices and quantities.

Units Bought

The quantity of a product that consumers purchase at a given price.

Tax Imposed

A financial charge or other levy instituted by a government on an individual or an entity to raise revenue for public purposes.

Deadweight Loss

An economic efficiency loss that occurs when market equilibrium is not achieved or when externalities are present, leading to a loss of total welfare.