Use the Information for the Question(s)below

question 49

Multiple Choice

Use the information for the question(s) below.
Luther Industries needs to raise $25 million to fund a new office complex. The company plans on issuing ten-year bonds with a face value of $1000 and a coupon rate of 7.0% (annual payments) . The following table summarizes the YTM for similar ten-year corporate bonds of various credit ratings:

-Which of the following equations is INCORRECT?

• A)Expected future spot interest rate = forward interest rate + risk premium
• B)(1 + f₁)× (1 + f₂)× (1 + f₃)× ... × (1 + f_n)= (1 + YTM_n)ⁿ
• C)f_n = - 1
• D)(1 + YTM_n)ⁿ = (1 + YTM_{n - 1})^{n - 1}(1 + f_n)

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Definitions:

Rhetoric Against Unions

Speech or discourse that criticizes labor unions, often used in the context of political or economic debates.

Automobile Producers

Companies engaged in the design, development, manufacturing, marketing, and selling of motor vehicles.

American Automobile

The industry and culture surrounding the manufacturing, marketing, and use of cars and trucks in the United States.

General Motors

An American multinational corporation headquartered in Detroit that designs, manufactures, markets, and distributes vehicles and vehicle parts.