Exhibit 18.3 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 34

Multiple Choice

Exhibit 18.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A $1000 par value bond with 4 years to maturity and a 5% coupon has a yield to maturity of 6%. Interest is paid annually.
-Refer to Exhibit 18.3. Estimate the percentage price change for this 4-year $1,000 par value bond, with annual 5% coupon, if the yield falls from 6% to 5.5%.

• A)-3.50%
• B)-1.75%
• C)1.75%
• D)3.50%
• E)None of the above

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Definitions:

Cost of Overstocking

Expenses incurred from having excess inventory, including storage costs, decreased product value, and potential waste.

Cost of Understocking

The financial loss or opportunity cost incurred by a business when it does not hold enough inventory to meet customer demand.

Optimal Cycle

Refers to the most efficient sequence or timing of events or operations to achieve the best outcome.

Fire Sale

A sale of goods at extremely discounted prices, typically due to the seller's urgent need to dispose of these items quickly.