The Price of a Bond Is Equal to the Sum

question 70

Multiple Choice

The price of a bond is equal to the sum of the present values of its future payments.Suppose a certain bond pays $50 one year from today and $1,050 two years from today.What is the price of the bond if the interest rate is 5 percent?

• A)$1,050.00
• B)$1,045.35
• C)$1,000.00
• D)$945.35

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Definitions:

Average-cost Method

The average-cost method is an inventory costing method that assigns an average cost to each item in inventory, used to determine the cost of goods sold and ending inventory values.

Weighted-average Cost Method

This inventory costing method assigns a weighted average cost to each unit in inventory, used to calculate cost of goods sold and ending inventory.

Lower-of-cost-or-market

An accounting principle that states assets should be recorded at the lower value of either its cost or its market value.

Specific Identification

An accounting method used to track and assign costs to individual inventory items.