Consider a 3-Year Bond with a Par Value of $1,000

question 57

Multiple Choice

Consider a 3-year bond with a par value of $1,000 and an 8% annual coupon.If interest rates change from 8 to 6% the bond's price will:

• A) increase by $51.54.
• B) decrease by $51.54.
• C) increase by $53.46.
• D) decrease by $53.46.

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Definitions:

P-value

The likelihood of test results being as significantly extreme or more so than what was observed, on the pretext that the null hypothesis is correct.

Two-sided Test

A statistical hypothesis test which determines if there is a significant difference in either direction between the groups or variables being studied.

One-sided Test

A hypothesis test in which the alternative hypothesis specifies a direction of the statistical significance, either greater than or less than a certain value.

P-value

The probability of encountering test data at least as extreme as what has been observed, with the assumption that the null hypothesis is valid.