Your uncle Albert gives you a savings bond that pays $500 four years from now. If the relevant interest rate for you is 2%, what is the present value of the bond?

Question

Quizplus · Accepted Answer

The present value (PV) of the bond can be calculated using the formula PV = FV / (1 + r)^n, where FV is the future value ($500), r is the annual interest rate (2% or 0.02), and n is the number of years (4). Plugging in the values, PV = $500 / (1 + 0.02)^4 = $461.92.

Your Uncle Albert Gives You a Savings Bond That Pays