Consider a Security with a Face Value of $100 000

question 1

Multiple Choice

Consider a security with a face value of $100 000, which is to be repaid at maturity. The security pays an annual coupon of 8 per cent and has a maturity of three years. The current discount rate is 10 per cent. What is the security's current price (round to two decimals) ?

• A) $124 000
• B) $95 026.30
• C) $19 894.82
• D) $100 000

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Definitions:

Defense Mechanisms

Unconscious psychological strategies employed to protect oneself from anxiety and to manage emotional conflict and internal or external stressors.

Anxiety

A mood of unease or nervousness, often due to something happening soon or because the consequence is unknown.

Freud

Sigmund Freud, recognized for his theories on the unconscious mind and the development of psychoanalytic therapy.

Fixation

In psychology, a persistent focus of the id’s pleasure-seeking energies at an earlier stage of psychosexual development.