A Bond That Pays Interest Semiannually Has a 6 Percent

question 30

Multiple Choice

A bond that pays interest semiannually has a 6 percent promised yield and a price of $1,045. Annual interest rates are now projected to increase 50 basis points. The bond's duration is five years. What is the predicted new bond price after the interest rate change? (Watch your rounding.)

• A)$1,020.35
• B)$1,069.65
• C)$1,070.36
• D)$1,019.64
• E)None of these choices are correct.

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Definitions:

Emissions Standards

Emissions standards are government-imposed limits on the amount of pollutants that can be emitted by vehicles and other sources, to protect environmental and public health.

Marginal Social Benefit

The supplementary advantage to society from the production or utilization of an additional unit of a product or service.

Pollution

The introduction of harmful substances or products into the environment, causing adverse effects on living beings and ecosystems.

Marginal Social Cost

The additional cost to society as a whole of producing one extra unit of a good or service.