A Corporation Issues a Bond That Generates the Above Cash

question 39

Multiple Choice

A corporation issues a bond that generates the above cash flows.If the periods shown are 3 months,which of the following best describes that bond?

• A)a 15-year bond with a notional value of $5000 and a coupon rate of 5% paid quarterly
• B)a 15-year bond with a notional value of $5000 and a coupon rate of 1.25% paid annually
• C)a 30-year bond with a notional value of $5000 and a coupon rate of 3.75% paid semiannually
• D)a 60- year bond with a notional value of $5000 and a coupon rate of 5% paid quarterly

Understand the evidence of emotional reactions without deliberate rational thinking.

Understand the concept of the endowment effect in behavioral economics.

Recognize how prospect theory explains human behavior towards risks and rewards.

Identify the influence of anchoring on decision-making.

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Definitions:

Commercial Paper

An unsecured, short-term debt instrument issued by corporations, typically used for the financing of payroll, accounts payable, and inventories, and meeting other short-term liabilities.

Simple Interest

Interest computed solely on the initial sum or on the outstanding part of that initial sum.

Discount

A reduction applied to the regular price of goods or services, usually to incentivize purchase.

GICs

Guaranteed Investment Certificates, which are Canadian investment products that offer a guaranteed rate of return over a fixed period.