If the annual interest rate is 9%,what would you expect to pay for a discount bond paying $10,000 in two years?
A) $8,417
B) $8,200
C) $10,000
D) $11,881

Question

Quizplus · Accepted Answer

To calculate the price of a discount bond, we need to use the formula P = M / (1 + r)^n, where P is the price of the bond, M is the face value of the bond, r is the annual interest rate, and n is the number of years until maturity. In this case, M = $10,000, r = 9% or 0.09, and n = 2. Plugging these values into the formula, we get:
P = $10,000 / (1 + 0.09)^2
P = $8,417. Therefore, the best choice is A.

If the Annual Interest Rate Is 9%,what Would You Expect