Suppose a Google.com bond will pay $4,500 ten years from now.If the going interest rate on safe 10-year bonds is 4.25%, how much is the bond worth today?
A) $2,819.52
B) $2,967.92
C) $3,116.31
D) $3,272.13
E) $3,435.74

Question

Quizplus · Accepted Answer

The present value of the bond is calculated using the formula: PV = FV / (1 + r)^n, where FV is the future value ($4,500), r is the interest rate (4.25% or 0.0425), and n is the number of years (10). Plugging in the values: PV = 4500 / (1 + 0.0425)^10 = $2,967.92.