Consider a one-year discount bond that pays $1,000 at maturity.If the annual rate of discount is 7 percent, the present value of the bond is

Question

Quizplus · Accepted Answer

The present value of the bond can be found using the formula:
Present Value = Future Value / (1 + r)^n

where r is the annual rate of discount and n is the time period until maturity.

In this case, r = 0.07 (7 percent) and n = 1 (since it is a one-year bond).

Plugging in the values, we get:

Present Value = 1000 / (1 + 0.07)^1
= 1000 / 1.07
= $934.58 (rounded to two decimal places)

Therefore, the correct choice is B.

Consider a One-Year Discount Bond That Pays $1,000 at Maturity