Joe Is Shopping for a New Computer

question 20

Multiple Choice

Joe is shopping for a new computer. A computer can be delivered to Joe's home for $1,200. Alternatively, Joe can pick up the same computer at the warehouse for $1,000. How should Joe buy the computer?

• A)Joe should drive to the warehouse because $1,000 is less than $1,200.
• B)Joe should drive to the warehouse if his cost of driving to the warehouse is less than $200.
• C)Joe should drive to the warehouse if his cost of driving to the warehouse is greater than $200.
• D)Joe should drive to the warehouse because the $200 he would save by driving to the warehouse is more than 10% of the purchase price.

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Definitions:

Coupon Rate

The interest rate a bond pays each year, shown as a percentage of its face value.

Yield To Maturity

The total return expected on a bond if it is held until the date it matures, including both interest payments and the difference between the bond's current market price and its face value.

Semi-Annually

Occurring or calculated twice a year, typically every six months.

Face Value

The nominal or original value stated on a financial instrument, such as a bond or stock certificate, not necessarily its current market value.