By How Much Will a Bond Increase in Price Over

question 124

Multiple Choice

By how much will a bond increase in price over the next year if it currently sells for $925, has five years until maturity, and an annual coupon rate of 7%?

• A)$8.26
• B)$8.92
• C)$12.55
• D)$15.00 Using the BAII Plus calculator:

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Definitions:

Common Stock Offering

The process by which a corporation issues new shares of common stock to the public.

Dividend Tax Credit

Tax formula that reduces the effective tax rate on dividends.

Canadian Corporations

Companies incorporated under the laws of Canada, subject to Canadian corporate regulations and taxation.

Cash Flow To Creditors

A firm’s interest payments to creditors less net new borrowings.