A Bond Has a Face Value of 10,000 Dollars

question 28

Multiple Choice

A bond has a face value of 10,000 dollars.It will pay 1,000 dollars in interest at the end of every year for the next 48 years.At the time of the final interest payment, 48 years from now, the company that issued the bond will redeem the bond at face value.That is, the company will buy back the bond from its owner at a price equal to the face value of the bond.If the interest rate is 10% and is expected to remain at 10%, how much would a rational investor pay for this bond right now?

• A)58,000 dollars
• B)10,000 dollars
• C)48,000 dollars
• D)More than any of the above amounts.
• E)Less than any of the above amounts.

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Definitions:

Relay Station

A site for receiving, transmitting, or processing signals, often used in communications or neurological contexts.

Sensory Information

Data obtained from the environment through the senses - sight, hearing, touch, taste, and smell - which is then processed by the brain to form perceptions.

Bridge

A structure built to span physical obstacles without blocking the way underneath it, typically designed for road, railway, or pedestrian use.

Brainstem

The lower extension of the brain where it connects to the spinal cord, managing vital functions such as breathing, heart rate, and blood pressure.