If Zero-Coupon Bonds Are Available with an Implied Interest Rate

question 99

Multiple Choice

If zero-coupon bonds are available with an implied interest rate of 5% and a face value of $30,000, what is the approximate purchase price for those bonds?

• A) $28,571.43
• B) $30,000
• C) $1,428.57
• D) $31,428.57

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Definitions:

Progressive

Pertaining to ideas, policies, or attitudes favoring progress, change, improvement, or reform, particularly in social conditions.

Average Tax Rate

The proportion of total income that is paid in taxes, calculated by dividing the total amount of taxes paid by total income.

Marginal Tax Rate

The rate at which your last dollar of income is taxed, indicating the tax rate applied to the next dollar of taxable income.

Excise Tax

Excise tax is a specific type of tax imposed on certain goods, services, and activities, often included in the price of products like tobacco, alcohol, and gasoline.