Suppose You Purchase a 10-Year AAA-Rated British Bond for Par

question 32

Multiple Choice

Suppose you purchase a 10-year AAA-rated British bond for par that is paying an annual coupon of 9 percent and has a face value of 1,000 British Pounds (£) . The spot rate is US$1.105 for £. At the end of the year,the bond is downgraded to AA and the yield increases to 11 percent. In addition,the new spot rate becomes US$0.985 for £.
What is the loss or gain to a U.S. investor who holds this bond for a year?

• A)−11.28% loss
• B)−10.14% loss
• C)−15.32% loss
• D)−8.71% loss
• E)−12.71% loss

Recognize the legal and academic implications of plagiarism.

Familiarize with tools and areas of the internet used for anonymous and potentially illicit activities.

Define and spot instances of fake news and its impact on information dissemination.

Understand the concept of copyright, public domain, and the respective rights associated with them.

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Definitions:

Disposable Income

Money that households can earmark for spending and saving after income taxes are considered.

Consuming Too Much

Consuming too much refers to the act of using or buying more resources or products than are needed, often leading to waste and potential environmental and economic consequences.

Saving Too Little

A situation where individuals or countries do not save enough income or resources for future needs, potentially leading to financial instability.

Disposable Income

Financial means left for households to spend and save after income tax obligations.