A bond is issued with a $500

Question

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)
Responses

$0
0 dollars

$10
10 dollars

$500
500 dollars

$510

Answer 1

If an investor purchases the bond at face value ($500) and the bond has a yield of 2% with a maturity of 1 year, the interest payment can be calculated as follows:

Interest payment = Face value × Yield = $500 × 2% = $500 × 0.02 = $10.

At maturity, the bondholder will receive the face value of the bond plus the interest payment. Therefore:

Total payment at maturity = Face value + Interest payment = $500 + $10 = $510.

So, the bondholder should expect to receive $510 at maturity.