Your Client Has Been Offered a 5-Year,$1,000 Par Value Bond

question 115

Multiple Choice

Your client has been offered a 5-year,$1,000 par value bond with a 10 percent coupon.Interest on this bond is paid quarterly.If your client is to earn a simple rate of return of 12 percent,compounded quarterly,how much should she pay for the bond?

• A) $800
• B) $926
• C) $1,025
• D) $1,216
• E) $981

Learn how interest rates affect the supply of loanable funds and investment decisions.

Understand the functions and outcomes of usury laws in credit markets.

Comprehend the concept of normal profit and economic cost.

Appreciate the role of profit and risk in business operations.

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Definitions:

Multiproduct Break-even Analysis

An analysis technique used to determine the point at which total revenue equals total costs for multiple products, indicating no profit or loss.

Total Sales

The sum of all sales revenue that a company earns over a given period of time.

Discounted Value

The present value of a future amount of money or stream of income, adjusted for time and risk.

Future Cash Receipts

Expected incoming cash flows or earnings in future periods, often used in accounting, budgeting, and investment analysis.