Macroeconomics + Economy 2009 Update 18th Edition by Campbell McConnell, Sean Masaki Flynn,Stanley Brue

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CALCULATING PRESENT VALUES USING CURRENT INTEREST RATES To see the current interest rates ("yields") on bonds issued by the U.S. government, please go to www.bloomberg.com/markets/rates/index.html and scroll down to the section labeled U.S. Treasuries. By tradition, U.S. government bonds with maturities of less than 1 year are called bills, while those with longer maturities are referred to as either notes or bonds. The notes have maturities of 1 to 10 years, while the bonds have maturities exceeding 10 years. What are the current yields on 2-year notes and 30-year bonds Use the current yield for the 2-year note to calculate the present value of an investment that will make a single payment of $95,000 in 2 years. Use the current yield on the 30-year bond to calculate the present value of an investment that will make a single payment of $95,000 in 30 years. To assist your computations, use the present value calculator located under Investment Calculators at www.timevalue.com/tools.html. Why the large difference in present values in the two situations