Consider a bond with a $100,000 face value that matures in 1 year.If the bond pays a nominal interest rate of 8%,what is the bond's discount?

Question

Quizplus · Accepted Answer

The formula to calculate bond discount is:
Discount = Face Value x (1 - 1/(1 + r)^n) where r is the nominal interest rate and n is the number of years until maturity.
Plugging in the values, we get:
Discount = $100,000 x (1 - 1/(1 + 0.08)^1)
Discount = $7,407
Therefore, the answer is B.

Consider a Bond with a $100,000 Face Value That Matures