alleryStart learning →In the present-value approach, a bond's fair value equals what?
AThe discounted sum of its expected cash flows
BIts face value minus the accrued interest
CIts coupon divided by the current yield
DIts par value plus one year of coupon
Answer & Solution
Correct answer: A. The discounted sum of its expected cash flows
A bond is worth the present value of the coupons and redemption money it is expected to pay, discounted at suitable rates.
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