The issue price of a bond is equal to:
A)The present value of the bond's cash payments discounted at the bond's market rate.
B)The present value of all future interest payments provided by a bond.
C)The present value of the principal for an interest-bearing bond.
D)The future value of all future cash payments provided by a bond.
E)The future value of all future interest payments provided by a bond.

Question

Quizplus · Accepted Answer

The issue price of a bond is determined by calculating the present value of the bond's future cash payments (interest and principal) discounted at the bond's market rate. This is commonly known as the bond's present value or fair value. Therefore, option A is correct. The other options are incorrect because they either refer to future values rather than present value, or they only consider either interest payments or principal amount, but not both.

The Issue Price of a Bond Is Equal To