A One-Year Discount Bond with a Face Value of $1000

question 16

Multiple Choice

A one-year discount bond with a face value of $1000 has an interest rate of 4%. What is its price?

• A)$960
• B)$961.54
• C)$996
• D)$1040

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Definitions:

Eurobond

International bonds issued in multiple countries but denominated in a single currency (usually the issuer’s currency).

Foreign Bond

A bond issued in a country by a foreign entity, denominated in the issuing country's currency.

Absolute Purchasing Power Parity

A theory in economics that suggests that in the absence of transaction costs and official barriers, the price of identical products sold in different countries should be the same when translated to a common currency.

Trade Barriers

Measures implemented by governments to restrict international trade, often aimed at protecting domestic industries.