If a $1,000 five-year bond that was issued at an interest rate of 7% is offered for sale one year before it matures, and the current interest is 5%, how much should an investor be willing to pay for it?

Question

Quizplus · Accepted Answer

The correct answer is A because the bond's present value is $1,019. The bond's present value is calculated as follows:PV = $1,000 / (1 + 0.05)^4 + $1,000 * 0.05 / (1 + 0.05)^4 = $1,019

If a $1,000 Five-Year Bond That Was Issued at an Interest