A corporation has promised to pay $1,000 20 years from today for each bond sold now. No interest will be paid on the bonds during the 20 years, and the bonds are discounted at an interest rate of 7%, compounded semiannually. Approximately how much should an investor pay for each bond?

Question

Quizplus · Accepted Answer

PV = FV/(1 + r)^tPV = $1,000/[1 + (.07/2)]^{20 × 2}PV = $252.57

A Corporation Has Promised to Pay $1,000 20 Years from Today