Assume That You Are Considering the Purchase of a 20-Year,noncallable

question 39

Multiple Choice

Assume that you are considering the purchase of a 20-year,noncallable bond with an annual coupon rate of 9.5%.The bond has a face value of $1,000,and it makes semiannual interest payments.If you require an 9.5% nominal yield to maturity on this investment,what is the maximum price you should be willing to pay for the bond?

• A) $1,140.00
• B) $1,010.00
• C) $1,000.00
• D) $1,220.00
• E) $980.00

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Definitions:

MTBF

Mean Time Between Failures, a measure of reliability for a system, indicating the average time between failures.

Standard Deviation

A statistical measure that quantifies the amount of variation or dispersion of a set of data values from their mean.

Preventive Maintenance

Scheduled maintenance activities conducted on equipment before faults occur in order to prevent breakdowns and minimize downtime.

Redundancy

The use of components in parallel to raise reliability.