Your Company Issues a 5-Year Bond with a Face Value

question 77

Multiple Choice

Your company issues a 5-year bond with a face value of $10,000 and a stated interest rate of 7%.The market interest rate is 5%.The issue price of the bond is calculated as the present value of:

• A)$10,000 in 5 years plus the present value of $700 a year for 5 years.
• B)$700 paid once a year for 5 years.
• C)$10,000 to be paid in 5 years.
• D)$10,000 in 5 years minus the present value of $700 a year for 5 years.

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Definitions:

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