What Is the Value of a Newly Issued 10-Year Bond

question 52

Multiple Choice

What is the value of a newly issued 10-year bond with face value of $10,000 and no coupon payments? Assume the interest rate is 7 percent (0.07) per year.

• A)$0
• B)$5,083.49
• C)$10,000
• D)$95,632.41
• E)$100,000.00

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Definitions:

Identical

Identical means exactly the same, without any difference in form, nature, or substance, often used to describe objects, products, or entities.

Long-run Equilibrium

A state in which all factors of production and inputs in a market are fully adjusted to the market conditions, allowing for steady-state operation without excess supply or demand.

Perfectly Competitive

A market structure characterized by a large number of small firms, homogeneous products, and no barriers to entry or exit.

Price

The capital needed to purchase a particular good or service.