Suppose That a Bond with a Face Value of $10,000

question 42

Multiple Choice

Suppose that a bond with a face value of $10,000 and coupon rate of 7% matures a year from now. It is selling for $9,880. What interest rate would make a person indifferent between the selling price of $9,880 and the bond payment (face value and coupon) one year from now?

• A) 7%
• B) 5.7%
• C) 1.3%
• D) 8.3%

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