The Corner Grocer Has a 7-Year,6 Percent Annual Coupon Bond

question 36

Multiple Choice

The Corner Grocer has a 7-year,6 percent annual coupon bond outstanding with a $1,000 par value.The bond has a yield to maturity of 5.5 percent.Which one of the following statements is correct if the market yield suddenly increases to 7 percent?

• A)The bond price will increase by $57.14.
• B)The bond price will increase by 5.29 percent.
• C)The bond price will decrease by $53.62.
• D)The bond price will decrease by 8 percent.
• E)The bond price will decrease by 8.36 percent.

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Definitions:

Indirect Expenses

Costs that are not directly attributable to a specific product or service but are necessary for the overall operation of a business, such as utilities, rent, and administrative salaries.

Gross Sales

Gross sales represent the total sales revenue of a company, without deducting any sales returns, allowances, or discounts.

Direct Expense

Expenses that can be directly tied to the production or sale of specific goods or services.

Traceable

Capable of being traced or tracked to a specific source or activity.