SA Corporation

question 89

Multiple Choice

S.A.Delay Corporation, a subsidiary of the Post Office, must decide whether to issue zero coupon bonds or quarterly payment bonds to fund construction of new facilities.The R1,000 par value quarterly payment bonds would sell at R795.54, have a 10 percent annual coupon rate, and mature in ten years.At what price would the zero coupon bonds with a maturity of 10 years have to sell to earn the same effective annual rate as the quarterly payment bonds?

• A) R274.50
• B) R271.99
• C) R198.89
• D) R257.52
• E) R254.84

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Definitions:

GDP Deflator

A technique for ascertaining the price level of all fresh, home-produced, final goods and services in an economy.

Real GDP

Real Gross Domestic Product (Real GDP) is a measure of a country's economic output adjusted for price changes (inflation or deflation), reflecting the real value of goods and services produced.

Percentage Change

A mathematical calculation that indicates the degree of change over time, expressed as a percentage, used to measure growth or decline in various contexts such as finance, economics, and statistics.

Nominal GDP

The gross domestic product measured in current prices, without adjusting for inflation, reflecting the value of all goods and services produced over a specific time period.