A Bond Has a Face Value of 5,000 Dollars

A bond has a face value of 5,000 dollars.It will pay 500 dollars in interest at the end of every year for the next 45 years.At the time of the last interest payment, 45 years from now, the company that issued the bond will redeem the bond at face value.That is, the company will buy back the bond from its owner at a price equal to the face value of the bond.If the interest rate is 10% and is expected to remain at 10%, how much would a rational investor pay for this bond right now?

A) 5,000 dollars
B) 27,500 dollars
C) 22,500 dollars
D) More than any of the above amounts
E) Less than any of the above amounts

Correct Answer:

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