Use the Following Information for Questions

question 66

Multiple Choice

Use the following information for questions. A product and service are bundled together and sold to customers for $350.The fair values of the product and service are $300 and $100 respectively.
-Under the relative fair value method, how much would be allocated to the product?

• A)$300.00
• B)$262.50
• C)$200.00
• D)$175.00

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Definitions:

Zero Coupon

A bond or debt security that does not pay interest (a coupon) but is traded at a deep discount, providing profit at maturity when the bond is redeemed for its full face value.

Yield

The income return on an investment, such as the interest or dividends received, expressed as an annual percentage of the investment cost.

Original Maturity

The fixed term length at the issuance of a bond or other fixed-income security until it reaches its due date for the repayment of the principal.

Current Yield

Current yield is the annual income (interest or dividends) divided by the current price of the security.