Assume a Semi-Annual Coupon Bond Matures in 3 Years, Has

question 15

Multiple Choice

Assume a semi-annual coupon bond matures in 3 years, has a face value of $1,000, a current market price of $1,089, and a 5 percent coupon. Which one of the following statements is correct concerning this bond?

• A)The current coupon rate is greater than 5 percent.
• B)The bond is a money market instrument.
• C)The bond will pay less annual interest now than when it was originally issued.
• D)The current yield is less than the coupon rate.
• E)The bond will pay semi-annual payments of $50 each.

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Definitions:

Excess Capacity

A situation where a company can produce more goods than demanded, often leading to underutilized resources or a need for strategic adjustments.

Competitive Bidding

A procurement process where suppliers submit proposals or bids to win a contract, often leading to lower prices through competition.

Fixed Costs

Costs that do not change with the level of production or sales activity, such as rent, salaries, and insurance.

Seasonal Variation

Fluctuations in business activity, sales, or other economic indicators that occur at regular intervals based on the season.