Jackson Central Has a 6-Year,8% Annual Coupon Bond with a $1,000

question 61

Multiple Choice

Jackson Central has a 6-year,8% annual coupon bond with a $1,000 par value. Earls Enterprises has a 12-year,8% annual coupon bond with a $1,000 par value. Both bonds currently have a yield to maturity of 6%. Which of the following statements are correct if the market yield increases to 7%?

• A) Both bonds would decrease in value by 4.61%.
• B) The Earls bond will increase in value by $88.25.
• C) The Jackson bond will increase in value by 4.61%.
• D) The Earls bond will decrease in value by 7.56%.
• E) The Earls bond will decrease in value by $50.68.

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Definitions:

Market Economy

An economic system where supply and demand within a free market determine the production of goods and services, with minimal governmental intervention.

Productivity

Productivity is a measure of efficiency, typically quantified as the ratio of output produced to the inputs used in the production process.

Economic Pie

A metaphorical representation of the total wealth or economic output available in a society or economy.

Cumulative Share

The total percentage of a market or segment controlled by a company or entity, accumulated over time.