You Are Considering the Purchase of a 15-Year $1,000 Face

question 170

Multiple Choice

You are considering the purchase of a 15-year $1,000 face value bond that pays interest of $90 annually . If you required a return of 10%, how much should you be willing to pay for this bond?

• A)$873.15
• B)$923.94
• C)$1,000.00
• D)$1,080.60
• E)$1,124.65

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Definitions:

Accrual Liabilities

Obligations that a company has incurred, for which invoices have not yet been received or payment has not been made.

Accounts Payable

Money owed by a business to its suppliers or creditors for goods and services received but not yet paid for.

Revolving Credit Agreement

A credit arrangement that allows a company or individual to borrow, repay, and borrow again up to a certain credit limit.

Commitment Fee

A fee charged by a bank for guaranteeing to have loanable funds available. The fee is charged on un borrowed amounts up to the maximum of the guarantee. See Revolving credit agreement.