Suppose a U.S.treasury bond will pay $1,700 five years from now.If the going interest rate on 5-year treasury bonds is 4.25%,how much is the bond worth today?

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 ($1,700), r is the interest rate (4.25% or 0.0425), and n is the number of years (5). Plugging in the values: PV = 1700 / (1 + 0.0425)^5 = $1,380.60.