A Bond Matures in 30 Years, Has a 20 Year

question 52

Multiple Choice

A bond matures in 30 years, has a 20 year duration and a yield to maturity of 9.32%. The change in the level of the market interest rate is 0.47%. The modified duration is and the percentage change in price is .

• A) 9.4 years; -.47%
• B) 14. years; 4.7%
• C) 18.29 years; -8.6%
• D) 18.29 years; 8.6%

---

Definitions:

Payback Period

The time it takes for an investment to generate an amount of income or cash equal to the cost of the investment, used to assess the profitability or risk of an investment.

Net Present Value

A financial metric that calculates the value of a series of cash flows by discounting them to the present value using a specific rate, often used to assess the profitability of an investment.

Net Present Value

The difference between the present value of cash inflows and outflows over a period, used to analyze the profitability of an investment.

Projected Annual Cash Inflow

An estimate of the total money expected to be received by a company over a year from its operational activities.