Consider a Bond Which Pays 7% Semi-Annually and Has 8

question 10

Multiple Choice

Consider a bond which pays 7% semi-annually and has 8 years to maturity. The market requires an interest rate of 8% on bonds of this risk. What is this bond's price?

• A) $942.50
• B) $911.52
• C) $941.74
• D) $1064.81

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Definitions:

Financial Markets

Marketplaces where individuals and institutions can trade financial securities, commodities, and other fungible items of value at low transaction costs and at prices that reflect supply and demand.

Specialists

Professionals on a stock exchange who are responsible for maintaining a fair and orderly market in their specific assigned securities.

Margin Account

An account offered by brokerages that allows investors to borrow money to buy securities, with the securities themselves serving as collateral for the loan.

Margin Loan

A loan provided by brokers to investors that allows them to buy securities by borrowing funds, using the purchased securities as collateral.