How Much Should You Be Prepared to Pay for a $1,000

question 41

Multiple Choice

How much should you be prepared to pay for a $1,000 10-year bond with a 6% coupon, semiannual payments, and a yield of 7.5%, compounded semiannually?

• A)$895.78
• B)$897.04
• C)$938.40
• D)$1,312.66

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Definitions:

Tax Deductible

Refers to eligible expenses that can be subtracted from taxable income, thereby reducing the total amount of tax owed to the government.

Discount

A reduction in the price of a good or service, typically to encourage purchase.

Cash Interest

The actual amount of interest paid in cash by a borrower during a given period for the use of borrowed funds.