Consider a Bond That Costs $1000 Today and Promises a One-Time

question 46

Multiple Choice

Consider a bond that costs $1000 today and promises a one-time future payment of $1080 in four years.What is the approximate interest rate on this bond?

• A)2%
• B)4%
• C)8%
• D)10.8%

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Definitions:

Extra Dividends

Dividends paid in addition to the expected regular dividends during a fiscal year, often signaling strong company performance.

Common Stockholders

Investors who own common shares in a company, having rights to vote at shareholders' meetings and to receive dividends.

Compensatory Stock Option Plan

A plan that provides employees the option to purchase company stock at a discounted price as part of their compensation.