Suppose a Perpetuity Bond with a Face Value of $1,000

question 83

Multiple Choice

Suppose a perpetuity bond with a face value of $1,000 has a 10% coupon rate. If market interest rates fall to 8%, the price of the bond:

• A) rises to $1,250.
• B) falls to $750.
• C) rises to $1,080.
• D) stays at $1,000.

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Definitions:

Factorial Research Design

An experimental design technique that involves studying the effects of two or more factors by changing them simultaneously to observe their interactions on dependent variables.

Independent Variables

Factors that are manipulated or varied in an experiment to observe their effect on dependent variables.

Combinations

A selection of items from a larger set where the order of selection does not matter.

Interaction Effect

An effect in statistical analysis indicating that the influence of one variable on the dependent variable differs across levels of another variable, demonstrating that the effect is not simply additive.