Question

Suppose a bond promises Rs.500 at the end of two years with no intermediate return. If the rate of interest is 5 percent per annum what is the price of the bond.

पर्याय

• Rs. 453.51

• Rs. 433.51

• Rs. 463.51

• Rs. 413.51

Answer 1

Rs. 453.51

Explanation:

Let's say the bond's price is Rs. P

We know that,

A = `"P"(1 + "r"/100)^"n"`

It is given that

A = Rs. 500

r = 5%

n = 2 years

Substituting the formula's values

500 = `"P"(1 + 5/100)^2`

Or, 500 = `"P" (1 + 1/20)^2`

Or, 500 = `"P"(21/20)^2`

Or, 500 = `"P"(441/400)^2`

Or P = `200000/441`

= 453.51

So, P = Rs 453.51

Therefore, Price of the bond is Rs. 453.51