If You Initially Pay $1,000 for a Bond with an Annual

question 124

Multiple Choice

If you initially pay $1,000 for a bond with an annual interest rate of 5 percent, but then the market interest rate falls to 4 percent

• A) the market price of the bond is still $1,000.
• B) the bond's annual interest payment remains equal to $50.
• C) the market price of the bond has increased.
• D) the market price of the bond has decreased.

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Definitions:

Residual Income

The net income that an investment earns beyond the minimum rate of return.

Margin

Generally refers to the difference between the selling price and the cost of a product or service, often expressed as a percentage of the selling price.

Customer Service Department

A department in an organization responsible for managing questions, assisting customers with problems, and offering details about the company's products or services.

Operating Divisions

Different sectors or sections within a company that focus on specific operational tasks or business units.