Suppose an Exxon Corporation 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?

Question

Quizplus · Accepted Answer

The present value of the bond can be calculated using the formula for present value: 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.

Suppose an Exxon Corporation Bond Will Pay $4,500 Ten Years