The Required Return on a Bond Is Equal to

question 6

Multiple Choice

The required return on a bond is equal to

• A) the real rate of return plus a risk premium plus an expected inflation premium.
• B) the real rate of return plus the coupon rate plus an inflation rate.
• C) the risk-free rate plus a risk premium plus an expected inflation premium.
• D) the real rate plus a risk premium.

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Definitions:

Investing Activities

Part of a company's cash flow statement that shows the cash spent on investments in capital assets and any cash received from the sale of those assets.

Equipment Account

A ledger account that tracks the purchase price, depreciation, and disposal of tangible assets such as machinery and equipment used in business operations.

Operating Activity

Business functions related to producing goods or services, which are reflected in the company's cash flow from operations.

Investing Activity

Investing activity refers to the purchase or sale of long-term assets and investments, reflecting a company’s spending on acquiring and disposing of long-term assets.