Assume That You Are Considering the Purchase of a $1,000

question 80

Multiple Choice

Assume that you are considering the purchase of a $1,000 par value bond that pays interest of $70 each six months and has 10 years to go before it matures. If you buy this bond, you expect to hold it for 5 years and then to sell it in the market. You (and other investors) currently require a nominal annual rate of 16 percent, but you expect the market to require a nominal rate of only 12 percent when you sell the bond due to a general decline in interest rates. How much should you be willing to pay for this bond?

• A) $ 842.00
• B) $1,115.81
• C) $1,359.26
• D) $ 966.99
• E) $ 731.85

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Definitions:

Chronic Disease

A long-term health condition that is persistent and typically requires ongoing medical attention or limits activities of daily living.

Chronic Stress

Persistent stress that continues over an extended period of time, leading to significant psychological and physical health issues.

Osteoarthritis

A degenerative joint disease characterized by the breakdown of cartilage and underlying bone, leading to pain and stiffness, especially in the hips, knees, and thumbs.

Joint

A point at which two bones connect in the body, facilitating movement and support, or a term indicating collective or combined effort in various contexts.