What Is the Expected Rate of Return on a Bond

question 28

Multiple Choice

What is the expected rate of return on a bond that pays a coupon rate of 9% paid semi-annually,has a face value of $1,000,matures in five years,and is currently selling for $1071?

• A)7.28%
• B)8.40%
• C)3.64%
• D)4.21%

---

Definitions:

Operating Capacity

The maximum output that a company can produce under normal conditions over a specific period.

Differential Cost

Differential cost, also known as incremental cost, is the difference in total cost that will result from selecting one option over another in decision-making processes.

Unused Capacity

Represents the available production or service facility capability that is not being utilized to its full potential.

Condensed Income Statement

A simplified financial statement that highlights a company's revenues, expenses, and profits over a specific period, omitting detailed line items.