Say that an investor purchased a discount bond that will pay $X in exactly 5 years. If...
Say that an investor purchased a discount bond that will pay $X in exactly 5 years. If the interest rate is 13% and the investor paid $6,426.4 for the bond, then what is X?
| $11,105.50 |
| $11,435.66 |
| $11,840.23 |
| $12,500.50 |
Homework Answers
Amount paid for the bond (Present value) = $6,426.4
Interest rate =13%
Time = 5 years
Calculate the amount to be received in 5 years -
Amount to be received = Present value (F/P, i, n)
Amount to be received = $6,426.4 (F/P, 13%, 5)
Amount to be received = $6,426.4 * 1.8424 = $11,839.99 or $11,840
The bond will pay $11,840 in exactly 5 years.
This is closest to $11,840.23.
Thus,
The correct answer is the option (c).
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