The Duration of a Par-Value Bond with a Coupon Rate

question 21

Multiple Choice

The duration of a par-value bond with a coupon rate of 8% (paid annually) and a remaining time to maturity of 5 years is

• A) 5 years.
• B) 5.4 years.
• C) 4.17 years.
• D) 4.31 years.

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Definitions:

Equipment Cost

Equipment cost refers to the total expense incurred from purchasing equipment, including acquisition cost, delivery charges, setup fees, and any other expenses associated with making the equipment ready for use.

Straight-Line Depreciation

Straight-Line Depreciation is a method of uniformly distributing the cost of a tangible asset over its useful life.

Net Working Capital

A measure of a company's liquidity, efficiency, and overall financial health, calculated by subtracting current liabilities from current assets.

Variable Costs

Costs that change in proportion to the level of activity in a business.