How Is the Value of a Bond Determined

question 23

Multiple Choice

How is the value of a bond determined?

• A) The present value of the bond's future cash flows is discounted by one or more appropriate rate(s).
• B) The perpetuity model is used to determine the value of a bond.
• C) The present value of the company's future cash flows is discounted by one or more appropriate rate(s).
• D) The constant growth dividend model is often used to value bonds.

---

Definitions:

Component Parts

The individual pieces or elements that collectively create a complete system or product.

Gestalt Grouping

Refers to the psychological principles that allow humans to perceive objects as organized patterns and wholes, rather than mere collections of individual components.

Similarity

The state of being alike or having common features.

Color

The characteristic of visual perception described through categories such as hue, saturation, and brightness, derived from the wavelengths of light.