A Bond with 23 Years to Maturity Is Selling for $991

question 46

Multiple Choice

A bond with 23 years to maturity is selling for $991 and has a yield to maturity of 8.12 percent. If this bond pays its coupon payments semiannually and par value is $1,000, what is the bond's annual coupon rate?

• A) 7.45 percent
• B) 8.03 percent
• C) 9.39 percent
• D) 10.82 percent

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Definitions:

Sunk Cost

A cost that has already been incurred and cannot be recovered, which should not affect future investment decisions.

Depreciation Cost

The allocated portion of an asset's initial cost over its useful life, recognized as an expense on financial statements.

Net Working Capital

The difference between a company's current assets and its current liabilities, indicating short-term financial health and operational efficiency.

Customer Credit

Credit extended by a business to its customers, allowing them to purchase goods or services and pay for them at a later date.