USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 26

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A $1000 par value bond with four years to maturity and a 5 percent coupon has a yield to maturity of 6 percent. Interest is paid annually.
-Refer to Exhibit 13.3. Calculate the current price of the bond.

• A) $964.90
• B) $965.35
• C) $981.41
• D) $1035.45
• E) $1035.85

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Definitions:

Consumer Surplus

The difference between the total amount consumers are willing to pay and the total amount they actually pay for a good or service.

Price Floor

A government-imposed minimum price charged on goods and services, typically above equilibrium price to prevent market prices from dropping too low.

Consumer Surplus

The difference in the amount consumers would ideally pay for a service or good versus what they really spend.

Producer Surplus

The imbalance between the desired compensation by producers for a good or service and the real income they secure.