The market value of a bond is equal to:
A) The present value of all future cash payments provided by a bond.
B) The present value of all future interest payments provided by a bond.
C) The present value of the principal for an interest-bearing bond.
D) The future value of all future cash payments provided by a bond.
E) The future value of all future interest payments provided by a bond.

Question

Quizplus · Accepted Answer

The market value of a bond is calculated by taking the present value of all future cash payments (both principal and interest) expected to be received from the bond. This is based on the time value of money concept that a dollar received in the future is worth less than a dollar received today. Therefore, the market value of a bond is the sum of the present values of all future cash payments.

The Market Value of a Bond Is Equal To