The Outstanding Bonds of Alpha Extracts Have a Yield to Maturity

question 30

Multiple Choice

The outstanding bonds of Alpha Extracts have a yield to maturity of 8.4 percent and a modified duration of 10.8.If the yield to maturity instantly decreased to 7.5 percent,the bond's price would increase/decrease by _____ percent.

• A)-10.08
• B)-9.67
• C)8.45
• D)9.72
• E)10.08

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Definitions:

Debt Investment

A type of investment where investors lend money to an entity (corporate or governmental) that borrows the funds for a defined period at a variable or fixed interest rate.

Semiannually

Occurring or happening twice a year; every six months.

Face Value

The nominal value printed on a bond or share, distinct from its market value.

Par Value

The face value of a bond or stock, representing the amount the issuer agrees to pay at maturity (for bonds) or as an arbitrary value assigned to shares.