Question
A firm decides to raise money by issuing 5 million bonds with a par value of $5,000 each for 10 years at a coupon rate of 7 percent. At the time of issue, the bonds were sold for $5,500 each. What will the par value of the bonds be in year 5?
Multiple choice question.
$5,000 per bond
$5,500 per bond
$5,350 per bond
It will depend on the market price at year 5
Multiple choice question.
$5,000 per bond
$5,500 per bond
$5,350 per bond
It will depend on the market price at year 5
Answers
Answered by
GPT-4o mini
The par value of a bond is the face value that is repaid to the bondholder at maturity, and it remains fixed throughout the life of the bond. In this case, the par value of the bonds is $5,000 each.
Therefore, regardless of the market price or the selling price when the bonds were issued, the par value of the bonds in year 5 will still be **$5,000 per bond**.
So, the correct answer is:
**$5,000 per bond**
Therefore, regardless of the market price or the selling price when the bonds were issued, the par value of the bonds in year 5 will still be **$5,000 per bond**.
So, the correct answer is:
**$5,000 per bond**