A bond is issued with a $500 face value, a 2% yield, and a maturity of 1 year. If an investor purchases the bond at face value and holds it until the bond's maturity date, how much should the bondholder expect to receive in payment?(1 point)

Question

Responses

$500
500 dollars

$0
0 dollars

$10
10 dollars

$510

Answer 1

If the bond has a face value of $500 and a yield of 2%, then at maturity, the bondholder will receive the face value of the bond plus the interest earned.

The interest earned over one year can be calculated as follows:

Interest = Face Value × Yield Interest = $500 × 0.02 = $10

At maturity, the bondholder will receive the face value plus the interest:

Total Payment = Face Value + Interest Total Payment = $500 + $10 = $510

Therefore, the bondholder should expect to receive $510.