A Bond That You Held to Maturity Had a Realized

question 37

Multiple Choice

A bond that you held to maturity had a realized return of 8%, but when you bought it, it had an expected return of 6%. If no default occurred, which one of the following must be true?

• A) The bond was purchased at a premium to par.
• B) The coupon rate was 8%.
• C) The required return was greater than 6%.
• D) The coupons were reinvested at a higher rate than expected.
• E) The bond must have been a zero coupon bond.

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Definitions:

Methanogens

Microorganisms that produce methane as a metabolic byproduct in anoxic conditions.

Chemoautotrophs

Organisms that obtain energy by the oxidation of inorganic substances, such as hydrogen sulfide or ammonia, and use this energy to convert carbon dioxide into organic matter.

Bacterial Exotoxins

Potentially harmful proteins secreted by bacteria into their external environment, capable of causing various diseases in host organisms.