If the Nominal Interest Rate Is 4

question 48

Multiple Choice

If the nominal interest rate is 4.6% per year, how much money can an individual borrow today if she needs to repay $300 in one year?

• A) $286.81.
• B) $256.81.
• C) $180.81.
• D) $208.81.
• E) $166.81.

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Definitions:

Yield To Maturity

The total return anticipated on a bond if held until it matures, including all payments of principal and interest, measured as an annual rate.

Noncallable Bonds

Bonds that cannot be redeemed by the issuer before their maturity date, providing investors with certainty that they will receive interest payments for the life of the bond.

Par Value

The stated value of a bond, stock share, or coupon as declared by the issuer.

Annual Coupon

The interest payment distributed each year to holders of bonds, generally represented as a percentage of the bond's principal amount.