The Following Information Relates to Problems

question 24

Multiple Choice

The following information relates to Problems
an investor purchases a nine-year, 7% annual coupon payment bond at a price equal to par value. after the bond is purchased and before the first coupon is received, interest rates increase to 8%. The investor sells the bond after five years. assume that interest rates remain unchanged at 8% over the five-year holding period.
-The capital gain/loss per 100 of par value resulting from the sale of the bond at the end of the five-year holding period is closest to a:

• A) loss of 8.45.
• B) loss of 3.31.
• C) gain of 2.75.

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Definitions:

Form

The structure, appearance, or configuration of something, especially as distinct from its substance or content.

Correlation Coefficient

A statistical measure that calculates the strength and direction of a linear relationship between two quantitative variables.

Malaria

A disease caused by a plasmodium parasite, transmitted by the bite of infected mosquitoes.

Dewpoint

The temperature at which air must be cooled, at constant pressure and water vapor content, for it to reach saturation and produce dew.