Answer :
The correct price is $98.04 for the first scenario and $102 for the second scenario. The given prices of $97.6 and $101 are not correct based on the given parameters.
Interest is the price you pay to borrow money or the cost you charge to lend money. Interest is most often reflected as an annual percentage of the amount of a loan. This percentage is known as the interest rate on the loan.
To determine the price of a discount bond, you can use the formula:
\[ \text{Price} = \frac{\text{Face Value}}{(1 + \text{Interest Rate})^{\text{Number of Periods}}} \]
Let's calculate the price for the given scenarios:
1. Interest Rate = 2%, Face Value = $100
\[ \text{Price} = \frac{\$100}{(1 + 0.02)^1} = \$98.04 \]
2. Interest Rate = 2%, Face Value = $100
\[ \text{Price} = \frac{\$100}{(1 + 0.02)^1} = \$102 \]
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