Use the Following Information for Questions

question 55

Multiple Choice

Use the following information for questions
A bank has a planned 2-year investment horizon.It is considering investing in a 2-year bond that pays 6% annually versus investing in a 4-year bond that pays 6.5% annually and then selling it after two years.The annual coupon payments can be reinvested at 4%.
-What will be the realized compound yield if the bank invests in the 4-year security and sells it at the end of two years, assuming interest rates remain unchanged?

• A)4.00%
• B)5.48%
• C)5.94%
• D)6.01%
• E)6.85%

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Definitions:

Wage Rate

The amount of money paid to an employee per unit of time, which can be hourly, daily, or annually.

Total Product

The overall amount of products made by a company within a specific timeframe.

Marginal Product

The additional output produced by using one more unit of a variable input, holding other inputs constant.

Labor Input

The amount of work or effort provided by employees or workers that is used in the production of goods and services.