A Bond Is Scheduled to Mature in Five Years

question 33

Multiple Choice

A bond is scheduled to mature in five years.Its coupon rate is 9 percent with interest paid annually.This $1,000 par value bond carries a yield to maturity of 10 percent.What is the duration of the bond?

• A)4.677 years.
• B)5.000 years.
• C)4.674 years.
• D)4.328 years.
• E)4.223 years

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Definitions:

Expected Loss

The predicted amount of loss a business might suffer due to risks, calculated as the sum of all possible losses multiplied by their respective probabilities.

Weak Axiom

A principle used in consumer choice theory that stipulates if a consumer chooses bundle A over bundle B when both are affordable, then the consumer should not choose B over A when prices change, holding income constant.

Risk Inconsistency

The phenomenon where an individual's tolerance for risk changes in unpredictable ways over time or across different contexts.

Expected Loss

The anticipated amount of loss a business might suffer due to various risk factors.