If the Final Expressions in a Present Value Equation Used

question 431

Multiple Choice

If the final expressions in a present value equation used to calculate the price of a bond you are considering buying are "[$50 / (1 + .08) ³] + [$500 / (1 + .08) ³]," which of the following is correct?

• A)The face value is $500,the coupon is $50,and the coupon will mature in 3 years.
• B)The face value is $50,the interest rate you need is 8 percent,and the coupon will mature in 3 years.
• C)The face value is $500,the interest rate you need is 3 percent,and the coupon will mature in 8 years.
• D)The coupon is $50,the interest rate you need is 1.08 percent,and the coupon will mature in 3 years.

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Definitions:

P(A ∪ B)

The chance that either event A or event B, or both, will happen.

P(B | A)

The probability of event B occurring given that event A has already occurred, representing a conditional probability.

Finalists

The remaining candidates in a competition or selection process who have passed through preliminary rounds and are considered for the final award or decision.

First And Second

Terms denoting the sequential order of events, items, phases, conditions, or priorities.