The Required Rate of Return on a Bond Is

question 31

Multiple Choice

The required rate of return on a bond is

• A) the interest rate that equates the current market price of the bond with the present value of all future cash flows received.
• B) equivalent to the current yield for non par bonds.
• C) less than the Err for discount bonds and greater than the Err for premium bonds.
• D) inversely related to a bond's risk and coupon.
• E) none of the above.

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Definitions:

Double-declining-balance

An accelerated depreciation method that doubles the normal depreciation rate.

Salvage Value

The estimated residual value of an asset at the end of its useful life, representing what it could potentially be sold for or scrapped.

Book Value

The net value of a company's assets minus its liabilities and intangible assets, often used to determine a company's actual value.

Double-declining-balance

A method of accelerated depreciation where the depreciation expense decreases over time, doubling the rate of straight-line depreciation.