What Is the Return on a 5 Percent Coupon Bond

question 43

Multiple Choice

What is the return on a 5 percent coupon bond that initially sells for $1,000 and sells for $1,200 one year later?

• A) 5 percent
• B) 10 percent
• C) -5 percent
• D) 25 percent
• E) None of the above

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Definitions:

Commercial Paper

A short-term unsecured debt instrument issued by corporations to finance their immediate operational needs.

Unsecured Debt

A type of debt or general obligation that is not protected by a guarantor or collateralized by a lien on specific assets of the borrower.

Short-Term

Relating to or occurring on a brief or immediate timescale, typically within one year.

Short-Term Collateralized

Financial arrangements that involve the use of assets as collateral for a short-duration loan.