WPI Has a Bond Issue Outstanding That Has a Coupon

question 103

Multiple Choice

WPI has a bond issue outstanding that has a coupon rate of 10% and a current yield of 11%. The yield to maturity on this bond is 12%. What is the market price, to the nearest dollar, of the WPI bond if it pays interest semiannually and has 10 years to mature?

• A) $941
• B) $1,021
• C) $1,000
• D) $885

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Definitions:

Exponential Random Variable

A type of continuous random variable often used to model the time between events in a process with a constant rate.

Exponential Distribution

A probability distribution that describes the time between events in a Poisson process, modeling the occurrence of events over time.

Density Function

A mathematical expression that represents the distribution probability of a continuous random variable.

Y-intercept

The point at which a line or curve crosses the y-axis of a graph, indicating the value of the dependent variable when the independent variable is zero.