Suppose an Investor Purchases a One-Year Bond Today, for $960

question 20

Multiple Choice

Suppose an investor purchases a one-year bond today, for $960.The bond promises a return of $1,000.She purchases another one-year bond, after a year, for $887 that promises a return of $990.What is the yield to maturity earned by the investor on the purchase of these two short­term bonds?​

• A)​6.50 percent
• B)​7.85 percent
• C)​8 percent
• D)​10 percent

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Definitions:

Inverse Relationship

A situation where two variables move in opposite directions, meaning as one variable increases, the other decreases.

Gardner

Howard Gardner is a developmental psychologist best known for his theory of multiple intelligences, which suggests that individuals have various kinds of intelligences.

Sternberg

often associated with Robert Sternberg, an American psychologist known for his theory on intelligence, creativity, and wisdom.

Intelligence

The capacity for learning, understanding, problem-solving, and the ability to acquire and apply knowledge.