Ameritech Has Just Issued a $1,000 Par Value Bond That

question 90

Multiple Choice

Ameritech has just issued a $1,000 par value bond that will mature in 10 years. This bond pays interest of $45 every six months. If the annual yield to maturity of this bond is 8%, what is the price of the Ameritech bond if the market is in equilibrium?

• A) $991.50
• B) $1,067.96
• C) $1,112.82
• D) $1,141.19

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Definitions:

Standard Price

A predetermined cost that companies use for budgeting and assessing the performance of actual costs.

Actual Materials Purchased

The total quantity and cost of raw materials bought during a period for the purpose of production.

Labour Rate Variance

The difference between the actual cost of labor and the standard or expected cost.

Standard Cost Per Bag

A pre-determined cost estimate for producing or purchasing a single unit of product, in this context, a bag.