The market value (present value) of a bond is a function of all of the following except the
A) dollar amounts to be received.
B) length of time until the amounts are received.
C) market rate of interest.
D) length of time until the bond is sold.

Question

Quizplus · Accepted Answer

The market value (present value) of a bond is not affected by the length of time until the bond is sold, only by the length of time until the amounts will be received (i.e., the maturity date) and the market rate of interest that reflects the opportunity cost of investing in the bond. The market value of a bond is not affected by the length of time until the bond is sold, as this is not a factor that affects the cash flows of the bond. The market value of a bond is determined by the present value of its expected cash flows, which are affected by the dollar amounts to be received, the length of time until the amounts are received, and the market rate of interest.

The Market Value (Present Value) of a Bond Is a Function