The Price of a Bond Is Equal to the Sum

question 70

Multiple Choice

The price of a bond is equal to the sum of the present values of its future payments.Suppose a certain bond pays $50 one year from today and $1,050 two years from today.What is the price of the bond if the interest rate is 5 percent?

• A)$1,050.00
• B)$1,045.35
• C)$1,000.00
• D)$945.35

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Definitions:

Honorific

A title or word implying or expressing high status, politeness, or respect.

Ancestral Clan

A social group defined by common ancestry, often characterized by shared cultural or religious practices and a recognized common heritage.

Navajo Indians

A Native American people of the Southwestern United States, recognized for their craftsmanship, particularly in weaving, and their significant culture and history.

Biologically Inherited

Traits or characteristics that are passed from parents to offspring through genes, including physical attributes and susceptibility to certain diseases.