EduFarming
Your list · 0हिं

Type at least two letters. Press Esc to close.

↑↓ navigate↵ openTAB cycle filter

Perpetuity, Sinking Funds & Bonds · Question 39 of 63

At what discount to face value did the investor buy the ₹500 bond?

Question 39

EasyOriginal question

An investor buys a bond of face value ₹500 with an 8% annual coupon for ₹480, one year before it is redeemed at face value.

At what discount to face value did the investor buy the ₹500 bond?

Options for question 39

Show the answer and explanation
CorrectNot quiteAnswer A

Correct answer: A

Explanation

  1. The discount is 500−480=20500 - 480 = 20 rupees.

  2. As a share of face value: 20500×100=4%\frac{20}{500} \times 100 = 4\%.

Worth noting

4.17% divides by the price paid; a discount to face value is a share of the face value.

Concept
A discount to face value
Typical time
90 s
Your time
—
The rule this testsBonds and their terms
Practise this chapter →

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

Practise this chapter →

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

Practise this chapterAll 63 questions in Perpetuity, Sinking Funds & BondsRevise the notes for Perpetuity, Sinking Funds & Bonds