You Are Considering Two Bonds

question 14

Multiple Choice

You are considering two bonds. Both have semiannual, 6% coupons, $1,000 face values, and yields to maturity of 6.5%. Bond S matures in 5 years and Bond L matures in 10 years. What is the difference in the current prices of these bonds?

• A)$12.51
• B)$12.67
• C)$13.52
• D)$14.67
• E)$15.29

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Definitions:

Stabilizing Selection

Natural selection that acts against extreme phenotypes and favors intermediate variants; associated with a population well adapted to its environment. Compare with directional selection and disruptive selection.

Natural Selection

The process by which individuals with traits better suited to their environment are more likely to survive and reproduce, driving the evolution of species.

Population

A collection of the same species individuals who live in a specified area and breed among themselves.

Hardy-Weinberg Principle

A principle stating that allele and genotype frequencies in a population will remain constant from generation to generation in the absence of other evolutionary influences.