What is the present value of a $\$ 1000$ bond which pays $\$ 40$ each year for 15 years, with the first payment one year from now? Assume the interest rate is 5.5\% per year compounded annually.
A) $\$ 849.44$
B) $\$ 401.50$
C) $\$ 856.16$
D) $\$ 843.07$

Question

Quizplus · Accepted Answer

The present value of the bond is calculated by finding the present value of the annuity (annual payments of $40) and the present value of the $1000 face value, both discounted at 5.5% over 15 years. The correct calculation results in approximately $849.44.

What Is the Present Value of A $1000\$ 1000$1000 Bond Which Pays

What Is the Present Value of A $\$ 1000$ Bond Which Pays