Answer to Question #91108 in Microeconomics for Rimie

Question #91108
A government bond with face value $1,000 matures next year. This means that next year the government will send the bond holder a $1,000 cheque (the bond is not worth anything afterwards). If the interest rate is 2.8%, what is the bond’s market price today? Explain.
1
Expert's answer
2019-06-24T15:45:42-0400

If the interest rate is 2.8%, then the bond’s market price today is 1,000/1.028 = 972.76.


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