Five years ago, the city of Baltimore sold at par a $1,000 bond with a coupon rate of 8 percent and 20 years to maturity. If this bond pays interest semiannually, what is the value of this bond to an investor who requires an 8 percent rate of return?

Question

Quizplus · Accepted Answer

The bond's value to an investor requiring an 8 percent rate of return matches its face value of $1,000 because the coupon rate (8 percent) equals the investor's required rate of return, and it pays interest semiannually, which aligns with the typical bond structure.

Five Years Ago, the City of Baltimore Sold at Par