Question

A bond issued by Liberty, Inc. has a coupon rate of 8% and a face value...

A bond issued by Liberty, Inc. has a coupon rate of 8% and a face value of $1,000. The bond will mature in 2 years. The bond is currently selling in the market at a price of $950. A potential investor calculates that in order to earn her required return of 9%, the present value of the bond is $982. What is the most that the investor should be willing to pay for the bond?


$1,000


$982


$1,160


$950
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Answer #1

Solution :- The Most or we say the maximum amount the investor should ready to pay is $982 As This is the rate according to his required return .

If the Investor pay the amount higher than $982 then he is unable to get recovered his required return so the maximum amount paid by investor is $982

Therefore the Correct answer is (B).

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