Use the Following Information for Questions

question 37

Multiple Choice

Use the following information for questions
A bank has a planned 2-year investment horizon. It is considering investing $1,000 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 2-year security and holds it until maturity?

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

---

Definitions:

Realization

The act of becoming fully aware of something as a fact or understanding a concept completely.

Open to Experience

A personality trait describing individuals who are imaginative, curious, and open-minded toward new experiences.

Neurotic

A characteristic of personality marked by fluctuations in emotion, anxiousness, shifts in mood, concerns, and apprehension.

Creativity

The ability to generate new ideas, solutions, or products that are both novel and appropriate.