Dave Harris Has Just Purchased a Bond with a Face

question 53

Multiple Choice

Dave Harris has just purchased a bond with a face value of $1,000 that pays 6 percent.The purchase price of the bond was $900,and the bond will mature in 5 years.What is the yield to maturity for this bond?

• A)5.5 percent
• B)6.0 percent
• C)8.4 percent
• D)9.0 percent
• E)6.7 percent

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Definitions:

Debt Covenants

Conditions imposed on borrowers by lenders as part of a loan agreement to protect the lender’s interests by restricting the borrower’s actions.

Earnings Target

A benchmark for financial performance set by a company, reflecting a goal for net income or earnings per share over a specific period.

Accounting Charge

An expense or cost recognized in a company's financial statements.

Discretionary Spending

Non-essential expenditures by consumers or the government, which can be adjusted based on the current financial situation.