The interest rate for a $1,000 bond is 6 percent. If comparable bonds are paying 8 percent, what is the approximate market value for of the 6 percent bond?
A) $1,000
B) $800
C) $750
D) $600
E) $500

Question

Quizplus · Accepted Answer

The market value of a bond is inversely proportional to the interest rate. Since the comparable bonds are paying 8 percent and the given bond is paying 6 percent, the given bond will be worth more than the comparable bonds. Therefore, the market value of the 6 percent bond will be approximately $750.

The Interest Rate for a $1,000 Bond Is 6 Percent