By the present value method, what is the value of a bond?

Its face value plus every one of its coupons, none of them discountedCorrect answerYour answerThe present value of its face value, leaving the coupons outCorrect answerYour answerIts face value multiplied by its coupon rate, for one yearCorrect answerYour answerThe present value of its coupons plus that of its face valueCorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer D

Correct answer: D

A bond's owner receives the coupons and, at maturity, the face value.
Its value today is the present value of all of these at the required rate of return.

Worth noting

Adding the coupons and the face value without discounting ignores when they are paid.

Concept: What a bond's value is made of
Typical timeTypical: 60 s
Your timeYours: —

The rule this testsValuing a bond

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Ten questions from Perpetuity, Sinking Funds & Bonds, at your own pace.

By the present value method, what is the value of a bond?

Explanation