Suppose a State of North Carolina bond will pay $1,000 ten years from now.If the going interest rate on these 10-year bonds is 5.5%, how much is the bond worth today?

Question

Quizplus · Accepted Answer

To find the present value of the bond, we use the formula for present value: PV = FV / (1 + r)^n, where PV is the present value, FV is the future value ($1,000), r is the interest rate (5.5% or 0.055), and n is the number of periods (10 years). Plugging in the values, we get PV = $1,000 / (1 + 0.055)^10 = $585.43.

Suppose a State of North Carolina Bond Will Pay $1,000