EduFarming
Your list · 0हिं

Type at least two letters. Press Esc to close.

↑↓ navigate↵ openTAB cycle filter

Perpetuity, Sinking Funds & Bonds · Question 58 of 63

What is the two-year bond worth when the market yield is 10% a year?

Question 58

MediumOriginal question

A bond with face value ₹1,000 pays a 9% coupon at the end of each year and is redeemed at face value in 2 years. Answers to the nearest paisa.

What is the two-year bond worth when the market yield is 10% a year?

Options for question 58

Show the answer and explanation
CorrectNot quiteAnswer A

Correct answer: A

Explanation

  1. Price =901.1+1,0901.12=81.82+900.83= \frac{90}{1.1} + \frac{1{,}090}{1.1^{2}} = 81.82 + 900.83.

  2. About ₹982.64.

Worth noting

₹990.91 discounts the final ₹1,090 for one year only.

Concept
Pricing a bond by discounting
Typical time
120 s
Your time
—
The rule this testsValuing a bond
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