Consider a Bond That Pays Annually an 8% Coupon with 20

question 52

Multiple Choice

Consider a bond that pays annually an 8% coupon with 20 years to maturity.The percentage change in the price of the bond if its yield to maturity increases from 5% to 7% is closest to:

• A)22%
• B)24%
• C)-22%
• D)-24%

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Definitions:

Liability

A financial obligation or debt owed by an individual or entity to another party that has to be paid back in the future.

Partly Owned Subsidiaries

Subsidiaries that are not wholly owned by the parent company, implying the existence of minority or non-controlling interests.

Ownership Interests

Rights or claims to assets and earnings, often associated with the holding of equity or shares in a company.

Fair Value Method

An accounting approach that assesses the price of an asset or liability based on current market conditions, rather than historical cost.