Suppose a State of New Mexico bond will pay $1,000 eight years from now.If the going interest rate on these 8-year bonds is 5.5%, how much is the bond worth today?

Question

Quizplus · Accepted Answer

The correct answer is A because the present value of the bond can be calculated using the formula:PV = FV / (1 + r)^nwhere PV is the present value, FV is the future value, r is the interest rate, and n is the number of years.In this case, FV = $1,000, r = 5.5%, and n = 8. Plugging these values into the formula, we get:PV = $1,000 / (1 + 0.055)^8 = $651.60

Suppose a State of New Mexico Bond Will Pay $1,000