The present value of a twoyear bond with a future payment of $1,345.50 and the yield to maturity of 3.6 percent is
A)$1,300
B)$1,500.50
C)$1,253.62
D)$1,246.72

Question

The present value of a two­year bond with a future payment of $1,345.50 and the yield to maturity of 3.6 percent is​
A)​$1,300
B)​$1,500.50
C)​$1,253.62
D)​$1,246.72

Quizplus · Accepted Answer

The present value of the bond can be calculated using the formula:

PV = FV / (1 + r)^n

Where: 
FV = future payment = $1,345.50
r = yield to maturity = 3.6% = 0.036
n = number of periods = 2

Substituting the values:

PV = $1,345.50 / (1 + 0.036)^2
PV = $1,253.62

Therefore, the correct choice is C.

The Present Value of a Two­year Bond with a Future

The Present Value of a Twoyear Bond with a Future