Suppose a one-year discount bond offers to pay $1000 in one year and currently has a 15% interest rate.Given this information,we know that the bond's price must be

Question

Quizplus · Accepted Answer

To calculate the present value of the bond, we can use the formula:

PV = FV / (1 + r)^n

Where PV is the present value, FV is the future value or face value, r is the interest rate, and n is the number of periods (years).

In this case, we have:

PV = 1000 / (1 + 0.15)^1
PV = 1000 / 1.15
PV = $869.56

Therefore, the price of the bond is $869.56.

Suppose a One-Year Discount Bond Offers to Pay $1000 in One