One Year Before Maturity, the Price of a Bond with a Principal

question 130

Multiple Choice

One year before maturity, the price of a bond with a principal amount of $1,000 and a coupon rate of 5% paid annually fell to $981.The one-year interest rate must be:

• A)8.5%.
• B)7.0%.
• C)5.0%.
• D)1.9%.

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Definitions:

Election

The formal process through which individuals cast votes to choose among candidates for political office or to decide on public policy issues.

Independence

The condition of a nation, country, or state which exercises self-government, and sovereignty, free from external control.

Louisiana Purchase

The acquisition by the United States of America of France’s claim to the territory of Louisiana in 1803, which doubled the size of the U.S.

Rocky Mountains

A major mountain range in western North America, stretching from Canada through the United States, known for its stunning landscapes and diverse ecosystems.