Doug Has Been Approached by His Broker to Purchase a $1,000

question 10

Multiple Choice

Doug has been approached by his broker to purchase a $1,000 bond for $795. He believes the bond should yield 8%. The bond pays a 5% annual coupon rate and has 10 years left until maturity. What should Doug's analysis of the bond indicate to him? Use annual analysis.

• A) The bond is undervalued; he should purchase it.
• B) The bond is undervalued; he should not purchase it.
• C) The bond is overvalued; he should purchase it.
• D) The bond is overvalued; he should not purchase it.

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A complex psychological state involving thoughts, feelings, and physiological changes, often in response to a stimulus.

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A level of intelligence quotient perceived to be significantly above the average range.