Consider a Zero-Coupon Bond with $100 Face Value and 15

question 46

Multiple Choice

Consider a zero-coupon bond with $100 face value and 15 years to maturity. If the YTM is 7.4%, this bond will trade at a price closest to ________.

• A) $41.13
• B) $34.27
• C) $47.98
• D) $54.83

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Definitions:

Resource Maximization

It is the technique or strategy of optimally utilizing resources to achieve the highest possible output or efficiency.

Least-costly Combination

A perfect combination of resources that lowers the production cost while reaching a target output level.

Profits

Financial gains realized when the revenues from business activities exceed the expenses, costs, and taxes needed to sustain the operation.

Profit-maximizing Combination

An optimal mix of inputs or factors of production that results in the highest possible profit for a firm, given the costs and available resources.