You Have Just Won a $50,000 Bond That Pays No

question 20

Multiple Choice

You have just won a $50,000 bond that pays no interest and matures in 20 years. If the discount rate is 10%, what is the present value of your bond?

• A) $7,450
• B) $8,175
• C) $8,900
• D) $1,490

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Definitions:

Priority Debts

Debts that are deemed more important than others and must be paid first in situations like bankruptcy proceedings.

Liquidated

To settle or pay a debt, often referring to the process of converting assets to cash.

Chapter 7 Petition

A legal document filed in a bankruptcy case that initiates the process for an individual or business to liquidate assets under the protection of Chapter 7 of the U.S. Bankruptcy Code.

Exemptions

Provisions in law allowing certain assets to be protected or income to be free from taxation or legal processes in specific situations.