An Analyst Is Considering the Purchase of a Government of Canada

question 29

Multiple Choice

An analyst is considering the purchase of a Government of Canada bond that will pay its face value of $10 000 in one year's time,but pay no direct interest.The market interest rate is 4% and the bond is being offered for sale at a price of $9400.The analyst should recommend

• A)purchasing the bond because the purchase price is more than its present value and is therefore profitable.
• B)purchasing the bond because the purchase price is less than its present value and is therefore profitable.
• C)not purchasing the bond because the buyer could earn an additional $224 by investing the $9400 elsewhere.
• D)not purchasing the bond because the buyer could earn an additional $376 by investing the $9400 elsewhere.
• E)not purchasing the bond because the purchase price is less than its present value.

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Definitions:

Electoral College

A body of electors established by the United States Constitution, charged with the responsibility of electing the president and vice president based on the popular vote in each state.

Constitution

The fundamental principles or established precedents according to which a state or other organization is governed.

Electoral College Votes

The process in the United States by which electors from each state cast votes to determine the President and Vice-President.

House of Representatives

The lower chamber of the United States Congress, composed of elected officials who represent individual districts in their states.