What Is the Expected Rate of Return on a Bond

question 100

Multiple Choice

What is the expected rate of return on a bond that matures in seven years,has a face value of $1,000,a coupon rate of 14%,and is currently selling for $911? Assume annual coupon payments.

• A)7.81%
• B)15.36%
• C)15.61%
• D)16.22%

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Definitions:

Stepwise Regression Technique

A method of fitting a regression model by adding or removing predictors based on a specified criterion.

Backward Selection

A stepwise regression method that starts with a full model and iteratively removes the least significant variables to optimize model performance.

Independent Variable

A variable in an experiment or mathematical model that is manipulated or changed to observe its effect on the dependent variable.

Bonferroni Criterion

A statistical adjustment method for multiple comparisons that lowers the threshold for statistical significance to control the overall type I error rate.