When a Financial Calculator or Spreadsheet Program Finds a Bond's

question 21

True/False

When a financial calculator or spreadsheet program finds a bond's yield to maturity,it uses a trial-and-error process.

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Definitions:

Profitability Index

A financial ratio that measures the relative profitability of an investment, calculated by dividing the present value of future cash flows by the initial investment cost.

Net Present Value

The gap between cash inflows' present value and cash outflows' present value during a certain period.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded over time for a fixed asset, reflecting its decrease in value.

Income Tax Rate

The percentage at which an individual or corporation is taxed. The tax rate may increase as taxable income increases (progressive tax rates).