Last year,Bentley bought a bond for $1,000 that promises to pay $45 a year.This year,a person who buys a bond for $1,000 receives $39 a year.If Bentley were to sell his (old)bond,its price would be approximately
A) $867.
B) $1,154.
C) $1,087.
D) $1,350.

Question

Quizplus · Accepted Answer

The yield of the new bond is 3.9% ($39/$1000). Bentley's bond pays $45 a year, so to find the price of Bentley's bond that would yield 3.9%, we use the formula: Price = Payment / Yield = $45 / 0.039 = $1,153.85, which is approximately $1,154.

Last Year,Bentley Bought a Bond for $1,000 That Promises to Pay