Question

A $1,000.00 bond at 85 1/4 % pays 6.8 % annual interest. Calculate cost of bond.

Answer 1

Based on the par value of the bond and the percentage it was issued at, the cost of the bond is $852.50.

What is the cost of the bond?

The current cost of the bond is the present value of the bond's cashflows and its par value.

This is taken into account when the bond is issued at a certain percentage which in this case is 85 ¹/₄%.

The cost of the bond is:

= 1,000 x 85 ¹/₄%

= $852.50

Find out more on the cost of bonds at brainly.com/question/15567868.

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