Assume That the Microsoft Bonds Have 5-Years to Maturity and Pay

question 53

Multiple Choice

Assume that the Microsoft bonds have 5-years to maturity and pay annual coupons of $100.The next coupon is due in one year.The yield on equivalently risky corporate bonds is currently 15%.Assume the yield stays at 15% over the life of the bond.Determine the price of the bond today and after each of the first four coupon payments.Plot those prices on a graph with price on the y-axis and time on the x-axis.(The x-axis starts at time 0 and ends on the date of the fourth coupon.) What do you note about the time path (slope of the line) of the bond price?

• A) It is upward sloping.
• B) It is downward sloping.
• C) It is a horizontal line.

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Definitions:

Psychographic Segmentation

The process of dividing a market into segments based on consumer personality traits, values, attitudes, interests, and lifestyles.

Marketing Mix

The set of controllable tactical marketing tools—product, price, place, and promotion—that a company uses to produce a desired response from its target market.

Distinctive Understanding

A unique comprehension or insight that sets an individual or concept apart from others.

Complex Product

A product that is made up of multiple components and involves intricate features, requiring a detailed understanding and specialized knowledge to use or maintain.