Consider a Bond Which Pays 7% Semiannually and Has 8

question 38

Multiple Choice

Consider a bond which pays 7% semiannually and has 8 years to maturity.The market requires an interest rate of 8% on bonds of this risk.What is this bond's price?

• A)$942.50
• B)$911.52
• C)$941.74
• D)$1,064.81
• E)None of the above

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Definitions:

Disposable Income

The allocation of funds households have to spend and save, after income tax adjustments.

Wage Earning

The act of receiving regular compensation for labor or services, typically on an hourly, daily, or piecework basis.

Severe Recession

An extended period of significant decline in economic activity across the economy, marked by high unemployment, low consumer spending, and decreased industrial production.

Permanent Income Hypothesis

A theory suggesting that consumer spending is primarily determined by an individual's long-term income expectations rather than their current disposable income.