A 12-Year, 5% Coupon Bond Pays Interest Annually

question 50

Multiple Choice

A 12-year, 5% coupon bond pays interest annually. The bond has a face value of $1,000. What is the percentage change in the price of this bond if the market yield rises to 6% from the current yield of 4.5%?

• A) 11.11% decrease
• B) 12.38% decrease
• C) 12.38% increase
• D) 14.13% decrease
• E) 14.13% increase

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Definitions:

Vitamin C

A water-soluble vitamin found in various fruits and vegetables, essential for the repair of tissue and enzymatic production of certain neurotransmitters.

Scurvy

A disease resulting from a deficiency of vitamin C, characterized by swollen bleeding gums, bruising, joint pain, and general weakness.

Magnesium

A mineral and a key component of many enzymes, playing a critical role in various physiological processes including muscle and nerve function, blood sugar control, and blood pressure regulation.

Carbon Dioxide Metabolism

The process by which living organisms produce energy through the oxidation of carbon dioxide, or its involvement in photosynthesis in plants.