Mary Wants to Purchase a 20-Year Bond That Has a Par

question 8

Multiple Choice

Mary wants to purchase a 20-year bond that has a par value of $1,000 and makes semiannual interest payments of $40. If her required yield to maturity is 10%, which of the following is closest to how much should Mary be willing to pay for the bond?

• A) $902
• B) $925
• C) $1000
• D) $828

---

Definitions:

Experiment

A procedure carried out under controlled conditions to discover an unknown effect or law, to test or establish a hypothesis, or to illustrate a known law.

Simple Event

In probability, a single outcome of an experiment or a situation where there is no combination of outcomes involved.

Event

An occurrence or outcome in a statistical experiment or study that can be distinctly identified.

Probability

A measure of the likelihood that an event will occur, often quantified as a number between 0 and 1.