?? Financial accounting question You are considering investing in a savings bondthat will pay $15,000 in ten years. If the competitivemarket interest rate is fixed at 8% per year, what isthe bond worth today?A) $8,375.92B) $6,947.90C) $3,238.38D) $8,467.10E) None

Present Value = Future Value / (1 + Interest Rate)^Number of Years Using the given values:Present…

Answered: You are considering investing in a…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 11P

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4. Suppose that an investment institution offers you two kinds of bonds and you are willing to take one of them. The first bond, called 'Bond A1' pays you $5000 in 10 years, while the second bond, called 'Bond B1' pays you the same amount but in 20 years. а. If the interest rate is 5%, what is the value of each bond today? Which bond is worth more? Why? b. If the interest rate increases to 8%, what is the value of each bond? Which bond has a larger percentage change in value? After knowing the answer of A and B, you will С. be able to complete this sentence: "The value of bond [rises / falls] when the interest rate increases, and bonds with longer time to maturity are [more/less] sensitive to changes in the interest rate"
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You are considering investing in a savings bond that will pay $15,000 in ten years. If the competitive market interest rate is fixed at 8% per year, what is the bond worth today? A) $8,375.92 B) $6,947.90 C) $3,238.38 D) $8,467.10 E) None