The Interest Rate on a 10 Percent, 10-Year Zero-Coupon Bond

question 139

Multiple Choice

The interest rate on a 10 percent, 10-year zero-coupon bond with a $1,000 face value falls from 8 percent to 7 percent. Which of the following is true of the value of the bond? (Round the answer to two decimal places.)

• A) The present value of the bond at 8 percent is $508.34.
• B) The present value of the bond at 7 percent is $463.19.
• C) The maturity value of the bond at 8 percent is $508.34.
• D) The maturity value of the bond at 7 percent is $508.34.
• E) The present value of the bond at 7 percent is $508.34.

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