How much does the $1,000 to be received upon a bond's maturity in four years add to the bond's price if the appropriate discount rate is 6 percent?

Question

Quizplus · Accepted Answer

The present value of the bond's principal payment can be calculated using the formula:

PV = FV / (1 + r)n

Where: 
FV = Future value of the payment ($1,000) 
r = Discount rate (6%) 
n = Number of periods (4 years)

Plugging in these values, we get:

PV = $1,000 / (1 + 0.06)4 
PV = $792.09

So the $1,000 payment adds $792.09 to the bond's price. The closest option is D: $792.09.

How Much Does the $1,000 to Be Received Upon a Bond's