Flo's Florals has a pure discount bond that comes due in one year and has a face value of $1,000. The risk-free rate of return is 3.7 percent. Flo's assets are expected to be worth either $950 or $1,100 in one year. Currently, these assets are worth $1,040. What is the current value of the debt of Flo's Florals?

A) $950.00
B) $942.60
C) $957.40
D) $964.32
E) $968.14

Pure Discount Bond

A type of bond that is sold at a discount to its face value, pays no interest to the holder, and is redeemed at its full face value at maturity.

Risk-Free Rate

The theoretical return on an investment with zero risk, often represented by the yield on government securities.

Face Value

The nominal or dollar value printed on a financial instrument, such as a bond or stock certificate, representing the amount to be paid at maturity or the value of a share.