The Face Value of a Bond Is $75,000, Its Stated

question 190

Multiple Choice

The face value of a bond is $75,000, its stated rate is 7%, and the term of the bond is five years. The bond pays interest semiannually. At the time of issue, the market rate is 8%. Determine the present value of the bonds at issuance. Present value of $1: Present value of annuity of $1:

• A) $53,709
• B) $21,291
• C) $71,991
• D) $75,000

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Definitions:

Tax Burden

The total amount of tax paid by individuals or businesses, often expressed as a percentage of income or GDP.

Inelastic

Refers to a condition where the demand for a product or service changes very little when there is a change in its price.

Price Elasticities

A measure of how much the quantity demanded or supplied of a good changes in response to a change in its price.

Social Security

A government program that provides financial assistance to retirees, disabled workers, and their families.