Question

A bond with a maturity value of $100,000 has a stated interest rate of 8 percent. Interest is paid annually. The bond matures in 10 years.
When the bond is issued, the market rate of interest is 10 percent.

What amount of cash is received when the bond is issued?
A. $100,000
B. $87,707
C. $49,157
D. $113,421

Answer 1

Answer:

$87,710.87

Explanation:

In this question, we use the present value formula which is shown in the spreadsheet.  

The NPER represents the time period.

Given that,  

Future value = $100,000

Rate of interest = 10%

NPER = 10 years

PMT = $100,000 × 8% = $80 00

The formula is shown below:

= -PV(Rate;NPER;PMT;FV;type)

So, after solving this, the answer would be $87,710.87