If you own a $1000 face value bond with one year remaining to maturity and a 3 per cent interest rate, and new bonds are paying 14 per cent, what is the most you can get for your old bond?
A)$903.51
B)$997.19
C)$1000
D)$1140

Question

Quizplus · Accepted Answer

To calculate the most you can get for your old bond, you need to find the present value of the bond using the new interest rate of 14%. 
PV = FV/(1+r)^n, where FV is the face value of the bond, r is the interest rate, and n is the number of years remaining to maturity. 
PV = 1000/(1+0.14)^1 
PV = $903.51 
Therefore, the most you can get for your old bond is $903.51, option A is correct.

If You Own a $1000 Face Value Bond with One