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densk [106]
3 years ago
5

Which bond would you expect to pay the highest interest rate?

Business
1 answer:
UNO [17]3 years ago
4 0

Answer:

The bond that should pay the highest interest rate is:

d. a bond issued by a new restaurant chain.

Explanation:

This is based on the fact that the new restaurant chain is untested, has higher risk profile and the bondholders are assuming higher risks, and the bond cannot be compared to the bonds issued by the US government, New York State, and General Motors, in that order.  The new restaurant chain will be offering a higher rate of return than others because it is new to the bond market and would like to attract potential bond investors.   Without the higher rate, therefore, it will not be successful in the bond issuance.

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The break even point marks the point where a company is able to cover all its expenses. At this point the company is not losing money, but it is not making a profit either.

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break even point in units = $10,000 / $3.75 = 2,666.67 ≈ 2,667 units

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