If the market interest rate remains at 5% for the next 29 years, and if Leggio's credit rating remains constant, then the price of its bonds will decrease gradually over time and be exactly $1,000 at maturity. True or false

Question

Zara Lane

Business

10 December, 03:09

If the market interest rate remains at 5% for the next 29 years, and if Leggio's credit rating remains constant, then the price of its bonds will decrease gradually over time and be exactly $1,000 at maturity. True or false

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Answers (1)

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Charity Lutz · Answer 1

Answer: True

Explanation:

A bond is a debt tool that provides a periodic stream of interest payments to investors while repaying the principal sum on a specified maturity time.

In the U. S., the face value is usually $1,000 or a multiple of $1,000. Hence as the credit value remains constant over the span of the 29 years, the bond keeps decreasing.