The issue price of a bond is equal to:
a. the future value of the face amount plus the future value of the periodic interest payments.
b. the future value of the face amount only.
c. the present value of the face amount plus the present value of the periodic interest payments.
d. the present value of the interest only.

C. The present value of the face amount plus the present value of the periodic interest payments.

Explanation:

A bond is described as a debt instrument that pays recurrent interest at the stated interest or coupon rate and face value at maturity. The bond issue price is the amount that investors pay when they purchase the bond for the first time.  The issue price is determined by the following factors, duration to maturity, interest or coupon rate, the par value, and maturity rate.

Since the bond pays fixed interest until maturity, the issue price must factor in the financial implication on these payments. The coupon rate is considered as it determines the amount of interest to be paid.  Bond pricing, therefore, involves the determination of the present value of the periodic payments, together with the face value of the bond.

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