What is the approximate market value of a $1,000 corporate bond that pays 6 percent interest when comparable bonds are paying 8 percent interest?
A)$60
B)$80
C)$750
D)$1,000
E)$1,060

Question

Quizplus · Accepted Answer

The market value of a bond is inversely related to the interest rate. If comparable bonds are paying 8% and this bond pays 6%, the bond's market value will be less than its face value ($1,000) because investors can get a better return elsewhere. Without doing the exact math, $750 is the only option significantly less than $1,000, making it the best approximation given the choices.

What Is the Approximate Market Value of a $1,000 Corporate