Zack Owns a Bond That Will Pay Him $35 Each

question 2

Multiple Choice

Zack owns a bond that will pay him $35 each year in interest plus a $1,000 principal payment at maturity.The $1,000 principal payment is called the:

• A) coupon.
• B) par value.
• C) discount.
• D) yield.
• E) call premium.
• F) None of the above.

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Definitions:

Net Present Value

A method used in capital budgeting to evaluate the profitability of an investment or project, calculated as the difference between the present value of cash inflows and outflows.

Debt-Equity Ratio

A financial measure that highlights the ratio of shareholders' equity to debt in a company's capital structure, often employed to scrutinize its leverage.

Flotation Cost

The overall expenses related to the issuance of new shares or bonds, encompassing fees for underwriting, legal services, and registration.

Startup Cost

Initial expenses incurred during the process of creating a new business, including but not limited to legal fees, marketing, and inventory costs.