A Two-Year Zero-Coupon Treasury Bond with a Maturity Value of R1,000

question 2

Multiple Choice

A two-year zero-coupon Treasury bond with a maturity value of R1,000 has a price of R873.4387.A one-year zero-coupon Treasury bond with a maturity value of R1,000 has a price of R938.9671.If the pure expectations theory is correct, for what price should one-year zero-coupon Treasury bonds sell one year from now?

• A) R798.89
• B) R824.66
• C) R852.28
• D) R930.23
• E) R989.11

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Definitions:

Income Summary Account

A temporary account used to accumulate all income and expense accounts before transferring the net amount to retained earnings at the end of an accounting period.

Retained Earnings

The portion of net earnings not distributed as dividends to shareholders, but retained by the company to be reinvested in its core business or to pay debt.

Permanent Account

Accounts that carry their ending balances over into the next accounting period, typically including assets, liabilities, and equity accounts.

Statement Of Changes

A financial statement that shows how a company's equity has changed during a specific period due to various factors like profits, losses, and dividend payments.