Austin Power Company Will Issue 20-Year,semiannual Bonds with an 7

question 21

Multiple Choice

Austin Power Company will issue 20-year,semiannual bonds with an 7.0% coupon rate and a $1,000 par value.Bonds of similar risk and maturity are currently selling to yield 8.0% in the market place.What is the market price of one of the firm's new bonds? Use a financial calculator to determine your answer.

• A)$1,000.00
• B)$953.16
• C)$901.04
• D)$879.36

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Definitions:

Balance of Payments

A financial statement that summarizes a country's financial transactions with the rest of the world for a specific period.

Rate of Exchange

The value of one currency for the purpose of conversion to another, indicating how much foreign currency can be exchanged for a unit of domestic currency.

Rate of Exchange

The price at which one currency can be exchanged for another, determining how much of one currency can be purchased with another currency.

Exchange Rate

The value of one country's currency in terms of another currency.