Suppose You Have a 12%,20 Year Bond Traded at $850

question 102

Multiple Choice

Suppose you have a 12%,20 year bond traded at $850.If it is callable in 5 years at $1,100,what is the bond's yield to call? Interest is paid semiannually.

• A) 8%
• B) 9.0%
• C) 18.0%
• D) 9.4%
• E) 16.5%

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Definitions:

Credit Sales

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Lenient Credit Terms

Lenient credit terms are more favorable conditions provided by a lender, allowing for longer repayment periods or lower interest rates to facilitate easier repayment for the borrower.

Uncollectible Accounts

Accounts receivable that are considered unlikely to be collected and thus written off as a bad debt expense.

Idle Cash

Idle cash refers to funds that are not currently invested, earning interest, or being used in operations, often representing missed opportunities.