The interest rate on a 10 percent, 10-year zero-coupon bond with a $1,000 face value falls from 8 percent to 7 percent. Which of the following is true of the value of the bond? (Round the answer to two decimal places.)
A) The present value of the bond at 8 percent is $508.34.
B) The present value of the bond at 7 percent is $463.19.
C) The maturity value of the bond at 8 percent is $508.34.
D) The maturity value of the bond at 7 percent is $508.34.
E) The present value of the bond at 7 percent is $508.34.
Correct Answer:
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