Consider a Security with a Face Value of $100 000

question 32

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 duration (round to two decimals) ?

• A) 2.78 years
• B) 3 years
• C) 0.36 years
• D) 1.94 years

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Definitions:

Polypropylene

A thermoplastic polymer made through the polymerization of propylene, used in packaging, textiles, and various types of containers.

Carbonate Ester

An organic compound formed by the reaction of a carbonate ion with an alcohol, often used as solvents and intermediates in chemical synthesis.

Glass Transition Temperature

The temperature range over which a polymer changes from a hard, glassy state to a soft, rubbery state.

Polymer

A large molecule or macromolecule composed of many repeated subunits.