A Bond Has a Face Value of 1,000 Dollars

question 18

Multiple Choice

A bond has a face value of 1,000 dollars.It will pay 100 dollars in interest at the end of every year for the next 44 years.At the time of the final interest payment, 44 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)1,000 dollars
• B)5,400 dollars
• C)4,400 dollars
• D)More than any of the above amounts.
• E)Less than any of the above amounts.

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Definitions:

Type 1 Diabetes

A chronic condition in which the pancreas produces little or no insulin, a hormone needed to allow glucose to enter cells to produce energy.

Insulin Shots

Injections of insulin used by individuals with diabetes to regulate their blood sugar levels.

Healthy Diet

A nutritional regimen that provides all the necessary nutrients in the right amounts and proportions for maintaining health and well-being.

Type 2 Diabetes

A persistent disorder that impacts how the body handles blood glucose, marked by a resistance to insulin.