Consider the Following Two Bonds That Pay Interest Annually At a Market Discount Rate of 4%, the Price Difference

question 24

Multiple Choice

Consider the following two bonds that pay interest annually: $\begin{array} { l c c } \hline \text { Bond } & \text { Coupon Rate } & \text { Time-to-Maturity } \\\hline \text { A } & 5 \% & 2 \text { years } \\\text { B } & 3 \% & 2 \text { years } \\\hline\end{array}$ At a market discount rate of 4%, the price difference between bond A and bond b per 100 of par value is closest to:

• A) 3.70.
• B) 3.77.
• C) 4.00.

---

Definitions:

Compressing

Compressing refers to the process of reducing the size of digital data by using algorithms to remove redundancies, making files easier to store or transmit over networks.

File

An electronic container holding data or computer code that serves as a basic unit of storage.

Folder

In Windows-based operating systems, an electronic container that holds files as well as other folders. It is also called a directory.

Disk Space

The amount of data that a storage device or medium can hold, usually measured in gigabytes or terabytes.