How Much Would an Investor Lose If She Purchased a 30-Year

question 32

Multiple Choice

How much would an investor lose if she purchased a 30-year zero-coupon bond with a $1,000 par value and 10% yield to maturity,only to see market interest rates increase to 12% 1 year later? (Hint: How much would the price change from a year earlier?)

• A) $19.93
• B) $20.00
• C) $23.93
• D) $25.66

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Definitions:

Implied Trust

A trust created by a court when (1) an express trust fails and the court can imply the existence of a trust from certain behavior or (2) the law steps in to protect someone from fraud or other wrongdoing.

Involuntary

Actions or reactions that occur without a person's conscious decision or control, often referencing physical or legal circumstances.

Oral Will

A will spoken out loud to witnesses in situations where a written will cannot be made, recognized as legally valid in some jurisdictions under specific conditions.

Revoking

The act of officially cancelling or withdrawing something, such as a law, contract, or privilege.