The Face Value Is $82,000,the Stated Rate Is 10%,and the Term

question 67

Multiple Choice

The face value is $82,000,the stated rate is 10%,and the term of the bond is eight years.The bond pays interest semiannually.At the time of issue,the market rate is 8%.What is the present value of the bond at the market rate? Present value of $1:
$$\begin{array} { | l | l | l | l | l | l | } \hline & 4 \% & 5 \% & 6 \% & 7 \% & 8 \% \\\hline 15 & 0.555 & 0.481 & 0.417 & 0.362 & 0.315 \\\hline 16 & 0.534 & 0.458 & 0.394 & 0.339 & 0.292 \\\hline 17 & 0.513 & 0.436 & 0.371 & 0.317 & 0.270 \\\hline 18 & 0.494 & 0.416 & 0.350 & 0.296 & 0.250 \\\hline 19 & 0.475 & 0.396 & 0.331 & 0.277 & 0.232 \\\hline\end{array}$$ Present value of annuity of $1:
$$\begin{array} { | r | c | c | r | r | r | } \hline & 4 \% & 5 \% & { 6 \% } & { 7 \% } & 8 \% \\\hline 15 & 11.118 & 10.380 & 9.712 & 9.108 & 8.559 \\\hline 16 & 11.652 & 10.838 & 10.106 & 9.447 & 8.851 \\\hline 17 & 12.166 & 11.274 & 10.477 & 9.763 & 9.122 \\\hline 18 & 12.659 & 11.690 & 10.828 & 10.059 & 9.372 \\\hline 19 & 13.134 & 12.085 & 11.158 & 10.336 & 9.604 \\\hline\end{array}$$

• A)$91,561
• B)$47,773
• C)$43,673
• D)$84,788

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Definitions:

Test-Statistic

A value calculated from sample data during a hypothesis test that is used to determine whether to reject the null hypothesis.

Two-Tail Test

A statistical test that determines the significance of a parameter by considering both ends (tails) of the distribution to test for extreme values.

Null Hypothesis

A hypothesis used in statistics that proposes no statistical significance exists in a set of given observations.

Level Of Significance

The threshold below which a p-value must fall for an effect or difference to be considered statistically significant in hypothesis testing.