All Three Bonds Pay Interest Annually

question 32

Multiple Choice

$\begin{array}{l}\text { The following information relates to Questions } 15 - 17\\\begin{array} { l c c c c } \hline \text { Bond } & \text { Coupon Rate } & \text { Time-to-Maturity } & \text { Time-to-Maturity } & \text { Spot Rates } \\\hline \mathrm { X } & 8 \% & 3 \text { years } & 1 \text { year } & 8 \% \\\mathrm { Y } & 7 \% & 3 \text { years } & 2 \text { years } & 9 \% \\\mathrm { Z } & 6 \% & 3 \text { years } & 3 \text { years } & 10 \% \\\hline\end{array}\end{array}$
All three bonds pay interest annually.
-based upon the given sequence of spot rates, the price of bond x is closest to:

• A) 95.02.
• B) 95.28.
• C) 97.63.

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Definitions:

Contribution Format

A format for the income statement that divides variable costs from fixed costs to emphasize the contribution margin.

Fixed Expenses

Costs that do not vary with the level of output or sales, such as rent and salaries.

High-low Method

A technique used in accounting and finance to estimate variable and fixed costs based on the highest and lowest levels of activity.

Monthly Fixed Component

The portion of fixed costs, such as rent or salaries, that does not change with the volume of production or sales in a given month.