What is the price of the bond if market interest rates are 6 percent?
A)$95,082.68.
B)$95,769.55.
C)$95,023.00.
D)$100,000.00.
E)$96,557.87. [Refer to: 9-89]

Question

Quizplus · Accepted Answer

The correct answer is A because the price of the bond is $95,082.68 when market interest rates are 6 percent. This is because the bond has a coupon rate of 5 percent, which is less than the market interest rate, so the bond will sell at a discount. The discount is calculated as the difference between the present value of the bond's future cash flows and the face value of the bond. In this case, the present value of the bond's future cash flows is $95,082.68, and the face value of the bond is $100,000.00, so the discount is $4,917.32.

What Is the Price of the Bond If Market Interest