The Duration of a Five-Year Bond with 7% Annual Coupons

question 24

Multiple Choice

The duration of a five-year bond with 7% annual coupons and a yield-to-maturity of 8% is closest to:

• A)6.2 years
• B)2.5 years
• C)4.4 years
• D)5.0 years

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Definitions:

Cost Driver

An activity or factor that incurs costs based on its level of use or consumption, influencing the total cost of production.

Activity Level

A measure of the volume or quantity of production or operations in a business, which can significantly impact costs.

Job Order Cost

The total cost associated with a specific job order, including direct materials, direct labor, and allocated manufacturing overhead.

Process Cost System

An accounting system used to track and assign costs to units of product in continuous, homogenous production processes.