A USTreasury Bond Will Pay a Lump Sum of $1,000 Exactly

question 41

Multiple Choice

A U.S.Treasury bond will pay a lump sum of $1,000 exactly 3 years from today.The nominal interest rate is 6%, semiannual compounding.Which of the following statements is CORRECT?

• A) The PV of the $1,000 lump sum has a smaller present value than the PV of a 3-year, $333.33 ordinary annuity.
• B) The periodic interest rate is greater than 3%.
• C) The periodic rate is less than 3%.
• D) The present value would be greater if the lump sum were discounted back for more periods.
• E) The present value of the $1,000 would be larger if interest were compounded monthly rather than semiannually.

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