The principal amount of a bond is $65,000, its stated rate is 7%, and the term of the bond is 5 years. The bond pays interest semiannually. At the time of issue, the market rate is 8%. Determine the present value of the bonds at issuance.
A)$44,265
B)$18,453
C)$62,393
D)$65,000

Question

Quizplus · Accepted Answer

The present value of the bond is calculated using the market rate of 8% (4% semiannually) to discount the semiannual interest payments and the principal repayment. The present value of the interest payments and the principal is $62,393.

The Principal Amount of a Bond Is $65,000, Its Stated