Kurt's Forest Products Is Currently Issuing Both 5-Year and 10-Year

question 15

Multiple Choice

Kurt's Forest Products is currently issuing both 5-year and 10-year bonds at par. The bonds each pay 6.5 percent annual interest and have face values of $1,000. You decide to purchase one of each of these bonds. Assume the yield to maturity on each of these bonds is 7.4 percent one year from now. Given this, you will realize _____ percent price depreciation on the 5-year bond and _____ percent price depreciation on the 10-year bond.

• A) 3.02; 3.39
• B) 3.02; 4.08
• C) 3.02; 5.77
• D) 3.39; 4.08
• E) 3.39; 5.77

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Definitions:

Economic Models

Theoretical constructs that represent economic processes by a set of variables and a set of logical and/or quantitative relationships between them.

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The branch of economic analysis that describes the way the economy actually works.

Production Possibility Frontier

A visual map outlying the highest possible production levels for two goods, considering a defined compilation of resources and other relevant factors.