A $100,000 5-Year 7% Bond Is Issued on January 1

question 41

Multiple Choice

A $100,000 5-year 7% bond is issued on January 1, 2020. The bond pays interest annually. The market rate is 6%. What is the selling price of the bonds, rounded to nearest dollar?

• A)$4,213
• B)$95,500
• C)$100,000
• D)$104,213

---

Definitions:

Templeton Growth Fund

A mutual fund that aims for long-term capital growth by investing primarily in the equity of companies around the world.

Invested

Money that is allocated for a particular purpose, such as buying stocks or bonds, in the hope of generating a financial return.

Strip Bond

A type of bond where the principal and regular coupon payments have been separated and are sold individually.

Compounded Semiannually

Interest calculated twice a year on the initial principal and previously earned interest.