You Buy a Bond with a $1,000 Par Value Today

question 17

Multiple Choice

You buy a bond with a $1,000 par value today for a price of $875. The bond has 6 years to maturity and makes annual coupon payments of $75 per year. You hold the bond to maturity, but you do not reinvest any of your coupons. What was your effective EAR over the holding period?

• A) 10.4%
• B) 9.57%
• C) 7.45%
• D) 8.78%

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Definitions:

Stress

A state of mental or emotional strain resulting from adverse or demanding circumstances.

Theory of Emotion

A framework for understanding how emotions are experienced, expressed, and recognized in oneself and others.

Activation

The process of making something active or operative, particularly in references to systems, substances, or biological functions.

Paraphilias

Unusual or atypical sexual interests towards objects, situations, or individuals, which may or may not lead to distress or harm.