If the discount rate on the bond is 5%, the expected payment in year-1 is $985; calculate the price of the bond:

Name: If the discount rate on the bond is 5%, the expected payment in year-1 is $985; calculate the price of the bond:
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The price of the bond can be calculated using the formula:
Price of bond = (Expected payment in year-1) / (1 + Discount rate)
Price of bond = $985 / (1 + 0.05) = $938.10
Therefore, the best choice is C.

If the Discount Rate on the Bond Is 5%, the Expected