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:

General Ledger

The master set of accounts that summarize all transactions occurring within an entity, serving as the main accounting record.

Special Journals

Accounting records that are used for the repeated recording of similar types of transactions, such as sales or purchases.

Control Accounts

An account in the general ledger that summarizes and aggregates the details of a subsidiary ledger.

Subsidiary Ledger

A detailed ledger that provides a breakdown of individual accounts receivable, accounts payable, or other account categories that together constitute a general ledger account.