What Is the Main Difference in Computing the Selling Price

question 144

Multiple Choice

What is the main difference in computing the selling price of a zero-coupon bond and the selling price of a traditional bond?

• A) There is no difference.
• B) Zero coupon bonds have zero interest paid during the term of the bond.
• C) No present value calculations are necessary.
• D) Zero-coupon bonds typically sell at a premium.

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Definitions:

Annual Dividend

The total payment received from a stock or other investment security over the span of a year, often distributed quarterly by the issuing company.

Dividend Increase

An action by a company to raise the amount of dividends paid to its shareholders.

Dividend Growth Rate

The annualized percentage rate of growth that a company's dividend undergoes over a period of time.

Required Rate of Return

The minimum return an investor expects to receive on an investment, considering its risk level.