An investor purchases a 20-year, $1,000 par value bond that pays semiannual interest of $40. If the semiannual market rate of interest is five percent, what is the current market value of the bond?
A)$ 858.
B)$1,686 .
C)$1,000.
D)$ 893.*PVA of $1: n=40; i=5% **PV of $1: n=40; i=5%

Question

Quizplus · Accepted Answer

The bond's current market value is calculated using the present value of annuities formula for the interest payments and the present value of a lump sum for the par value, both discounted at the semiannual market rate of 5%.

An Investor Purchases a 20-Year, $1,000 Par Value Bond That