One Year Before Maturity, the Price of a Bond with a Principal

question 20

Multiple Choice

One year before maturity, the price of a bond with a principal amount of $1,000 and a coupon rate of 5 percent paid annually fell to $981. The one-year interest rate must be:

• A)8.5 percent.
• B)7 percent.
• C)5 percent.
• D)1.9 percent.

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Definitions:

Gestalt

A psychological approach emphasizing that the whole of anything is greater than its parts, focusing on patterns and context in perception.

Proximity

The closeness or distance between people or objects, which can influence their interactions and perceptions of one another.

Auditory Rhythm

Temporal patterns in sound that are perceived by the auditory system, important in music and speech processing.

Reversible Figure

A visual pattern that easily allows more than one interpretation, in some cases changing the specification of figure and ground, in other cases changing the perceived organization in depth.