You have a bond that you can redeem for r₁0 000 one year from now.The interest rate is 10 per cent per year.How much is the bond worth today?
A)R9 090.91
B)R11 000.00
C)R9 000.00
D)R523.81

Question

Quizplus · Accepted Answer

The present value of the bond can be calculated using the formula:
PV = FV / (1 + i)n
where 
- PV = Present Value
- FV = Future Value
- i = Interest Rate
- n = Number of Periods

Plugging in the given values, we get:
PV = 10,000 / (1 + 0.1)1
PV = 10,000 / 1.1
PV = 9,090.91

Therefore, the bond is worth R9 090.91 today.

You Have a Bond That You Can Redeem for R₁0