A 20-Year Bond Pays 9% on a Face Value of $1,000

question 25

Multiple Choice

A 20-year bond pays 9% on a face value of $1,000. If similar bonds are currently yielding 6%, what is the market value of the bond? Use annual analysis. Use time value of money tables in Appendix B and Appendix D.

• A) Under $1,300
• B) Exactly $1,000
• C) Over $1,300
• D) Not enough information is given to tell.

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Definitions:

FASB

Stands for Financial Accounting Standards Board, which is responsible for establishing and improving financial accounting and reporting standards in the United States.

Note Receivable

A written promise to receive a specific amount of money at a future date.

Cash To Be Received

Expected cash inflows from various sources, such as sales, loans, and investments, not yet received but anticipated in the future.

Interest Rate

The percentage of the loan amount charged to the borrower as interest, usually presented as an annual rate.