An FI Manager Purchases a Zero-Coupon Bond That Has Two

question 2

Multiple Choice

An FI manager purchases a zero-coupon bond that has two years to maturity. The manager paid $826.45 per $1,000 for the bond. The current yield on a one-year bond of equal risk is 9 percent, and the one-year rate in one year is expected to be either 11.60 percent or 10.40 percent. Either rate is equally probable.
-What is the yield to maturity for the two-year bond if held to maturity?

• A)11.00 percent.
• B)10.00 percent.
• C)13.54 percent.
• D)11.60 percent.
• E)10.40 percent.

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Definitions:

MBTI

The Myers-Briggs Type Indicator, a personality inventory classifying individuals into 16 psychological types based on preferences in perceiving the world and making decisions.

Theories

Systematically organized principles designed to explain and predict phenomena.

Sigmund Freud's Approach

Centers on psychoanalytic theories which argue that unconscious drives and experiences from childhood are pivotal in shaping an individual's personality and behaviors.

Alfred Adler's Approach

Emphasizes the importance of feelings of inferiority and the striving for superiority as driving forces in human behavior and personality development.