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
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
1 answer:
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
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