If the Final Expressions in a Present Value Equation Used

question 431

Multiple Choice

If the final expressions in a present value equation used to calculate the price of a bond you are considering buying are "[$50 / (1 + .08) ³] + [$500 / (1 + .08) ³]," which of the following is correct?

• A)The face value is $500,the coupon is $50,and the coupon will mature in 3 years.
• B)The face value is $50,the interest rate you need is 8 percent,and the coupon will mature in 3 years.
• C)The face value is $500,the interest rate you need is 3 percent,and the coupon will mature in 8 years.
• D)The coupon is $50,the interest rate you need is 1.08 percent,and the coupon will mature in 3 years.