To Find the Yield on Investments Which Require the Payment

question 8

Multiple Choice

To find the yield on investments which require the payment of a single amount initially, and which then return a single amount some time in the future, the correct table to use is

• A) the present value of $1
• B) the future value of $1
• C) present value of an annuity of $1
• D) (a) and (b) above.

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Definitions:

Semiannual Interest Date

The twice-yearly date on which interest payments are made to bondholders or lenders.

Discount

A reduction from the usual cost of something, often used as a sales strategy to encourage purchases.

Amortize

The process of spreading out a loan or intangible asset cost over a specific period of time for accounting and tax purposes.

Par Value

The nominal or face value of a bond, share of stock, or coupon as stated by the issuer; it is not indicative of the security's market value.