If the discount rate on a bond is 5 percent and the expected payment in year 1 is $985, calculate the price of the bond Group of answer choices $938

Finance Aug 23, 2020

If the discount rate on a bond is 5 percent and the expected payment in year 1 is $985, calculate the price of the bond Group of answer choices $938.10 $985.00 $1,000.00 $1,050.00

Expert Solution

We can calculate the price of the bond by using the following formula in excel:-

=-pv(rate,nper,pmt,fv)

Here,

PV = Price of the bond

Rate = 5%

Nper = 1 periods

Pmt = $985

FV = $0

Substituting the values in formula:

= -pv(5%,1,985,0)

= $938.10

Correct option is 1). $938.10

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