A Bond That Pays Interest Annually Yields a Rate of Return

question 33

Multiple Choice

A bond that pays interest annually yields a rate of return of 8.74 percent.The inflation rate for the same period is 2.48 percent.What is the actual real rate of return on this bond?

• A)5.79%
• B)5.87%
• C)6.11%
• D)6.04%
• E)5.91%

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Definitions:

Sarbanes-Oxley Act

A U.S. federal law passed in 2002 that set new or expanded requirements for all U.S. public company boards, management, and public accounting firms, aiming to protect investors from fraudulent financial reporting.

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A group of elected individuals who represent shareholders and oversee the activities and strategic direction of a company.

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Professionals who execute trades on the exchange floor on behalf of their clients, matching buy and sell orders.

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Maturity matching is a financial strategy that involves aligning the duration of assets and liabilities to manage liquidity and risk.