A Five-Year Bond with a $1000 Face Value Has a Yield

question 41

Multiple Choice

A five-year bond with a $1000 face value has a yield to maturity is 5.5% and its coupon rate is 6.0% paid annually.The dirty price of this bond exactly 6 months after its second coupon payment is closest to:

• A)$684.67
• B)$983.93
• C)$1005.87
• D)$1043.49

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Definitions:

Allowance Method

Bases bad debt expense on an estimate of uncollectible accounts.

Bad Debt Expense

An expense reported on the income statement, representing the value of accounts receivable deemed non-collectible.

Accounts Receivable

Amounts owed to a company by customers for goods or services that have been delivered or used but not yet paid for.

Net Income

The residual income of a business following the subtraction of all taxes and costs from the total revenue.