Suppose a ten-year bond with a $10,000 face value pays a 5.0% annual coupon (at the end of the year), has 2 years left tomaturity, and has a discount rate of 6.5%. Which of the following would give you the present value - i.e. the price - of thebond?Select one:Oa. Present Value = Price = $10,500/(1.065)?Ob. Present Value = Price = [$500/(1.065)] + [$500/(1.065)²] + ... + [$500/(1.065)N), where N=0O c. Present Value = Price = [$500/(1.065)] + [$500/(1.065)²] +[$10,000/(1.065)²]O d. Present Value = Price = [$500/(1.065)] + [$500/(1.065)²]

The present value is calculated by the discounting the future earning based on the provided discount…

Suppose a ten-year bond with a $10,000 face value pays a 5.0% annual coupon (at the end of the year), has 2 years left to maturity, and has a discount rate of 6.5%. Which of the following would give you the present value - i.e. the price - of the pond?

Suppose a ten-year bond with a $10,000 face value pays a 5.0% annual coupon (at the end of the year), has 2 years left to maturity, and has a discount rate of 6.5%. Which of the following would give you the present value - i.e. the price - of the pond?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter5: Investment Decisions: Look Ahead And Reason Back

Section: Chapter Questions

Problem 5.2IP

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Question

Suppose a ten-year bond with a $10,000 face value pays a 5.0% annual coupon (at the end of the year), has 2 years left to
maturity, and has a discount rate of 6.5%. Which of the following would give you the present value - i.e. the price - of the
bond?
Select one:
Oa. Present Value = Price = $10,500/(1.065)?
Ob. Present Value = Price = [$500/(1.065)] + [$500/(1.065)²] + ... + [$500/(1.065)N), where N=0
O c. Present Value = Price = [$500/(1.065)] + [$500/(1.065)²] +[$10,000/(1.065)²]
O d. Present Value = Price = [$500/(1.065)] + [$500/(1.065)²]

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Suppose a ten-year bond with a $10,000 face value pays a 5.0% annual coupon (at the end of the year), has 2 years left to maturity, and has a discount rate of 6.5%. Which of thé following would give you the present value - i.e. the price – of the bond? Select one: a. Present Value = Price = $10,500/(1.065)² %3D %3D b. Present Value = Price = [$500/(1.065)] + [$500/(1.065)²] + ... + [$500/(1.065)NI, where N=00 c. Present Value = Price = [$500/(1.065)] + [$500/(1.065)²] +I$10,000/(1.065)²] %3D d. Present Value = Price = [$500/(1.065)] + [$500/(1.065)²]
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