A Bond with a Par Value of $1,000 Has an Annual

question 58

Multiple Choice

A bond with a par value of $1,000 has an annual interest payment of $85.The bond currently sells for $850 and has 8 years to maturity.Which of the following is true?

• A)The current yield on the bond must be 8.5%.
• B)The investor's required rate of return must be 8.5%.
• C)The coupon rate must be 8.5%.
• D)The yield to maturity must be 8.5%.

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Definitions:

Total Revenue

The total amount of money received by a firm from sales of its products or services, calculated as the quantity sold times the price per unit.

MC < MR

A condition in economic theory where marginal cost is less than marginal revenue, suggesting that increasing production would be profitable.

Profit Maximized

The point at which a firm achieves the highest possible profit margin, where marginal revenue equals marginal cost.

Total Cost

The overall expenditure incurred by a company in the production of goods or services, including fixed and variable costs.