What is the value of a newly issued 10-year bond with face value of $10,000 and no coupon payments? Assume the interest rate is 7 percent (0.07)per year.

Question

Quizplus · Accepted Answer

The value of a bond with no coupon payments can be calculated using the formula:
Value = (Face Value) / (1 + interest rate)^n
Where n is the number of years until maturity. In this case, n = 10.
Substituting the given values:
Value = (10,000) / (1 + 0.07)^10 = $5,083.49
Therefore, the correct answer is B.

What Is the Value of a Newly Issued 10-Year Bond