Margaret Wants to Compute the Present Value of a Six

question 118

Multiple Choice

Margaret wants to compute the present value of a six year semi-annual 8% coupon bond that has a 9% yield to maturity. Which one of the following is correct?

• A) The number of interest payments is twelve.
• B) The present value is assumed to be $1,000.
• C) The amount of each interest payment is $80.
• D) The bond is selling at a premium.
• E) The current price of the bond will be greater than the par value.

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Definitions:

Strong Devotion

Intense loyalty or commitment to a cause, person, or belief, often surpassing ordinary expectations.

Hereditary Rulers

Monarchs or leaders whose position is passed down within a family, often from parent to child, based on the principles of hereditary succession.

Nomadic Existence

A lifestyle characterized by moving from one place to another rather than settling permanently in one location, often for reasons such as seasonal resource availability.

Good Harvest

A particularly productive yield of agricultural produce.