Question

A single bond with a face value of $1,000 has a stated annual interest rate of 7.6%. The last bond traded on this day was 98.45%. Determine the cost of bond at costing.

Answer 1

The cost of the bond at costing is $984.50.

What is a bond?

• A bond is a type of financial security in which the issuer (the debtor) owes the holder (the creditor) a debt and is obligated to repay the principal (i.e. amount borrowed) of the bond at the maturity date as well as interest (called the coupon) over a specified period of time, depending on the terms.
• Interest is usually paid at regular intervals (semiannual, annual, and less often at other periods).
• As a result, a bond is a type of loan or IOU.
• Bonds provide the borrower with external funds to finance long-term investments or, in the case of government bonds, current expenditures.

To determine the cost of the bond at costing:

• $1,000 is the face value.
• Multiply this by the closing rate to find the cost of the bond at closing.
• $1,000 × .9845 = $984.50

Therefore, the cost of the bond at costing is $984.50.

Know more about bonds here:

brainly.com/question/25965295

#SPJ4