Ask Question
7 January, 14:39

If the final expressions in a present value equation used to calculate the price of a bond you are considering buying are "[$50 / (1 +.08) 3] + [$500 / (1 +.08) 3]", which of the following is correct? a. The face value is $500, the coupon is $50, and the coupon will mature in 3 years. b. The face value is $50, the interest rate you need is 8 percent, and the coupon will mature in 3 years. c. The face value is $500, the interest rate you need is 3 percent, and the coupon will mature in 8 years. d. The coupon is $50, the interest rate you need is 1.08 percent, and the coupon will mature in 3 years.

+1
Answers (1)
  1. 7 January, 14:59
    0
    Answer: A. The face value is $500, the coupon is $50, and the coupon will mature in 3 years

    Explanation: From the above question, one is able to note that the interest rate (r) is 8%, time (t) is 3 years to maturity and the face value of the bond is $500 while the coupon is $50.

    The above is a formula for coupon-bearing bond and it shows that the price of a bond is the present value of its promised cash flows.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “If the final expressions in a present value equation used to calculate the price of a bond you are considering buying are "[$50 / (1 +.08) ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers