Steve Purchased a Bond for $975

question 37

Multiple Choice

Steve purchased a bond for $975.00.Ninety days later he received interest income of $40.00,and then immediately sold the bond for $990.00.What is the annualized rate of return Steve earned on this investment?

• A) 5.6%
• B) 22.6%
• C) 16.4%
• D) 10.1%
• E) 12.3%

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Definitions:

Economies of Scale

Economies of scale are cost advantages that businesses obtain due to scale of operation, with costs per unit of output decreasing with increasing scale.

Discount Rate

The interest rate charged by central banks on loans extended to financial institutions or the rate used in discounted cash flow analysis to determine the present value of future cash flows.

Acquire a New Customer

The process of attracting and converting prospects into someone who makes a purchase and becomes a client of the business.

Existing Customer

An individual or business that has previously purchased goods or services from a company, distinguishing them from new or potential customers.