One Year Before Maturity,the Price of a Bond with a Principal

question 163

Multiple Choice

One year before maturity,the price of a bond with a principal amount of $1,000 and a coupon rate of 5% paid annually fell to $981.The one-year interest rate must have

• A) risen to 8.5%.
• B) risen to 7.0%.
• C) risen to 6.0%.
• D) remained at 5%.
• E) fallen to 2%.

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Definitions:

Unlimited Wants

The economic concept that human desires and needs are constant and infinite, whereas the resources to fulfill them are limited.

Best Use

Optimal allocation or application of resources to maximize efficiency or value.

Positive Statement

An objective statement based on factual information or data that can be tested or rejected through observation.

Normative Statement

A value-based statement that expresses an opinion about what ought to be rather than what is factual.