Use the Table for the Question(s)below

question 63

Multiple Choice

Use the table for the question(s) below.
Consider the following zero-coupon yields on default-free securities:
-The price today of a 3-year default-free security with a face value of $1000 and an annual coupon rate of 6% is closest to:

• A)$1000.
• B)$1021.
• C)$1013.
• D)$1005.

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Definitions:

Projected Cash Flows

Estimates of the amount of money expected to flow in and out of a business over a future period.

Time Value of Money

The principle that a dollar received today is worth more than a dollar received in the future, due to its potential earning capacity.

Hurdle Rate

The minimum acceptable rate of return on an investment that a manager or investor expects to achieve.