Which of the Following Bonds Has the Greatest Interest Rate

question 42

Multiple Choice

Which of the following bonds has the greatest interest rate price risk?

• A) A 10-year, $1,000 face value, zero coupon bond.
• B) A 10-year, $1,000 face value, 10% coupon bond with annual interest payments.
• C) All 10-year bonds have the same price risk since they have the same maturity.
• D) A 10-year, $1,000 face value, 10% coupon bond with semiannual interest payments.
• E) A 10-year $100 annuity.

Calculate and interpret ratios related to balance sheet items (e.g., long-term liabilities, accounts receivable).

Understand financial strategies that can improve a company's financial performance (e.g., increasing ROA).

Identify and calculate key financial ratios such as inventory turnover, interest coverage, and quick ratio.

Analyze the leverage and profitability of a company using financial data.

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Definitions:

Constant Rate

A fixed percentage or value that does not change over time in a given context.

Constant Dividend Growth Model

A method to estimate the value of a company's stock, assuming that its dividends grow at a constant rate indefinitely.

Dividend Growth Rate

The annualized percentage rate of growth of a company's dividend payments.

Market Value

The current price at which an asset or service can be bought or sold, determined by supply and demand in the marketplace.