What Is the Return on a 5 Percent Coupon Bond

question 20

Multiple Choice

What is the return on a 5 percent coupon bond that initially sells for $1,000 and sells for $900 one year later?

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

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Definitions:

Maturity

Maturity in finance refers to the date on which the principal or final payment of a loan, bond, or other financial instrument is due to be paid in full.

Percent of Sales Method

A financial forecasting model used to estimate certain balance sheet and income statement figures based on projected sales revenue.

Uncollectible Accounts Receivable

Refers to the portion of accounts receivable that a company does not expect to collect due to customers being unable to pay.

Allowance

An amount set aside or deducted to account for possible adjustments or for diminution in value, notably in the contexts of accounts receivable and inventory.