If the annual interest rate is 8%,what would you expect to pay for a discount bond paying $10,000 in ten years?
A) $4,632
B) $9,259
C) $10,000
D) $21,589

Question

Quizplus · Accepted Answer

To calculate the price of the discount bond, we use the formula:
Price = Face Value / (1 + Discount Rate) ^ Time
Discount Rate = Annual Interest Rate = 8%
Time = 10 years
Face Value = $10,000
Price = $10,000 / (1 + 0.08) ^ 10
Price = $4,632. Therefore, the best choice is A.

If the Annual Interest Rate Is 8%,what Would You Expect