A $5000 Bond with a Coupon Rate of 6

question 82

Multiple Choice

A $5000 bond with a coupon rate of 6.4% paid semiannually has four years to maturity and a yield to maturity of 6.2%.If interest rates fall and the yield to maturity decreases by 0.8%,what will happen to the price of the bond?

• A)fall by $98.64
• B)fall by $40.49
• C)rise by $84.46
• D)rise by $142.78

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Definitions:

Deferred Compensation

A portion of an employee's compensation that is set aside to be paid out at a later date, often used as a retirement benefit.

Treasury Stock

Shares of a company’s own stock that it has reacquired from shareholders but not retired, listed as a contra equity account on the balance sheet.

Common Stock Optionwarrants

Equity derivatives that give the holder the right to purchase common stock at a specified price within a certain time period.

Unrealized Increase

The potential gain in the value of an investment that has not yet been sold and thus not yet converted into actual profit.