Assume That Microsoft Bonds Have Just Left the Printer and Have

question 52

Multiple Choice

Assume that Microsoft bonds have just left the printer and have a stated coupon of $100 (a coupon rate of 10%) and a yield-to-maturity of 15%.The bonds mature in three years and the next coupon is due in one year.What is the fair price for the bond today?

• A) $956.52
• B) $885.84
• C) $832.39
• D) $1,000
• E) $918.71

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Definitions:

Fixed Cost

A recurring cost that does not vary with output or sales volume, including expenses like leases and insurance that remain constant no matter the business activity level.

Value Basis

The underlying value on which something is assessed or calculated, often referring to how assets, liabilities, or equity are valued in financial statements.

Unprocessed Wheat

Wheat that has not undergone any form of processing and remains in its natural state post-harvest.

Granary

A granary is a storage facility for threshed grains or animal feed.