Consider a Bond with a 9 Percent Coupon and a Current

question 20

Multiple Choice

Consider a bond with a 9 percent coupon and a current yield of 8 1/2 percent. What is this bond's price?

• A) $1058.82
• B) $1009.00
• C) $1085.00
• D) $1062.44
• E) $1077.96

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Definitions:

Proportional

Describes a relationship where changes in one variable cause changes in another variable at a constant ratio or rate.

Average Tax Rate

The ratio of total taxes paid to total income, representing the overall percentage of income that is taken by taxes.

Marginal Tax Rate

The rate at which the last dollar of a taxpayer's income is taxed, indicating how much of any additional income will be taken in taxes.

Marginal Tax Rate

The percentage of tax applied to the last dollar earned, reflecting the rate at which each additional dollar of income is taxed.