A $1,000 Par Value Bond, Paying $50 Semiannually, with an 8

question 20

Multiple Choice

A $1,000 par value bond, paying $50 semiannually, with an 8 percent yield to maturity and five years remaining to maturity should sell for

• A) $1,000.00.
• B) $1,081.11.
• C) $798.70.
• D) $880.22.
• E) none of the above.

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Definitions:

360-Day Year

A financial calculation assumption where the year is considered to have 360 days for simplifying interest calculations.

Exact Simple Interest

Interest calculated precisely on the principal amount over a specific period, normally based on a 365-day year.

365-Day Year

A method of calculating interest that uses a fixed calendar year of 365 days for computations, commonly used in financial contexts.

Exact Simple Interest

Interest calculation method using a 365-day year that does not account for the effect of compounding.