You friend Michelle is starting a fitness center that specializes in helping people get in shape through exercise and eating healthy.Because her business is new and risky,she is unable to obtain a loan from the local bank.You agree to pay $7,500 for a one-year bond from Michelle with an interest rate of 5%.The face value of the bond is:

Question

Quizplus · Accepted Answer

To calculate the face value of the bond, we need to use the formula:

Face Value = Bond Price / (1 + (Interest Rate x Time))

Where the bond price is $7,500, the interest rate is 5%, and the time is 1 year.

Plugging in the values, we get:

Face Value = $7,500 / (1 + (0.05 x 1))
Face Value = $7,500 / 1.05
Face Value = $7,142.86 (rounded to the nearest cent)

Therefore, the best choice is A) $7,875.00, which is the closest answer to the calculated face value when rounded to the nearest dollar.

You Friend Michelle Is Starting a Fitness Center That Specializes