Exhibit 17.2 Use the Information Below for the Following Problem(S)

question 50

Multiple Choice

Exhibit 17.2
Use the Information Below for the Following Problem(S)
XLR Corporation just issued a $1,000 par value bond with a 7% yield to maturity, twenty years to maturity, with an 8% semi-annual coupon rate.
-Refer to Exhibit 17.2.If market interest rates are constant,what will the price of the XLR Corporate bond be in three years?

• A) $904.29
• B) $1,097.63
• C) $1,098.50
• D) $1,102.85
• E) $1,105.62

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Definitions:

Utility Function

A representation in economics that shows the relationship between the utility (satisfaction) individuals receive from consuming goods and services and different consumption bundles.

Consumption

The action of using goods and services to satisfy needs or desires.

Income

Receipts from labor or investments, typically disbursed at regular intervals.

Consumption

The process by which goods and services are utilized to satisfy human wants, including the use of resources.