You have a bond that will pay you one hundred dollars one year from today.If the prevailing interest rate is r,the bond is currently worth

Question

Quizplus · Accepted Answer

The bond's present value is determined by discounting the future cash flow (the $100 payment) at the prevailing interest rate. The formula for present value is: PV = FV / (1 + r)^n, where PV is the present value, FV is the future value, r is the interest rate, and n is the number of periods. In this case, we have PV = 100 / (1 + r)^1, since there is one period (one year) until the payment is received. Therefore, the correct choice is C, which is equivalent to the formula for present value. Choices A, B, and D are all incorrect.

You Have a Bond That Will Pay You One Hundred