Roderick received a $100 savings bond for his graduation.The bond pays $100 at maturity,which is in five years.If the interest rate is 6 per cent,the bond has a present value of $90.09.

Question

Quizplus · Accepted Answer

The present value of the bond can be calculated using the present value formula:
PV = FV / (1+r)^n
where PV is the present value, FV is the future value, r is the interest rate, and n is the number of periods.

Plugging in the given values, we get:
PV = 100 / (1+0.06)^5
PV = 74.01

Therefore, the statement is false as the present value of the bond is $74.01, not $90.09.

Roderick Received a $100 Savings Bond for His Graduation