A $4000 accumulation bond (compound interest bond)pays interest at j₂ = 8% and is redeemable for $4100 in 10-years.It is bought to yield j₂ = 7%.What is the price of this bond?

Question

Quizplus · Accepted Answer

The correct answer is A because the price of the bond is $4454.99. This is calculated using the formula:```Price = FV / (1 + j)^n```where:* FV is the future value of the bond ($4100)* j is the yield to maturity (7%)* n is the number of years to maturity (10)Plugging these values into the formula, we get:```Price = 4100 / (1 + 0.07)^10= $4454.99```

A $4000 Accumulation Bond (Compound Interest Bond)pays Interest at J2

A $4000 Accumulation Bond (Compound Interest Bond)pays Interest at J₂