If the Market Rate of Interest Is 7%, the Price

question 26

Multiple Choice

If the market rate of interest is 7%, the price of 6% bonds paying interest semiannually with a face value of $500,000 will be

• A) equal to $500,000
• B) greater than $500,000
• C) less than $500,000
• D) greater than or less than $500,000, depending on the maturity date of the bonds

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Definitions:

Year

A period of approximately 365 days used for calculating time in most of the world, divided into 12 months.

Working Capital

Current assets minus current liabilities, indicating the liquidity of a business and its ability to meet short-term obligations.

Current Ratio

An indicator of how well a company can fulfill its short-term financial liabilities using assets that are readily convertible to cash.

Acid-Test Ratio

A financial metric that measures a company’s ability to pay off its current liabilities with only quick assets, excluding inventory.