You Are Considering Two Bonds

question 42

Multiple Choice

You are considering two bonds.Both have semi-annual,8 percent coupons,$1,000 face values,and yields to maturity of 7.5 percent.Bond S matures in 4 years and Bond L matures in 8 years.What is the difference in the current prices of these bonds?

• A) $10.51
• B) $11.33
• C) $11.52
• D) $12.67
• E) $12.88

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Definitions:

Attribution

The process by which individuals explain the causes of behavior and events.

Self-Serving Bias

The tendency to explain personal success by internal causes and personal failures by external causes.

Fundamental Attribution Error

A cognitive bias where individuals attribute others' actions to their character rather than external factors.

Spillover Effect

The influence of an event or behavior in one context spreading into another area, often unintentionally.