Question

Suppose a u. S. Treasury bond will pay $4,475 five years from now. If the going interest rate on 5-year treasury bonds is 4. 25%, how much is the bond worth today?.

Answer 1

The calculated worth of the given U.S. Treasury bond today is  mathematically given as $3634.23.

What does a Treasury bond do?

Treasury bonds (sometimes known as T-bonds) are fixed-rate debt instruments issued by the US government, with maturities ranging from 10 to 30 years. T-bonds offer semi-annual interest payments up until maturity, when the owner is given the bond's face value.

Do Treasury Bonds pay interest monthly?

Interest on my savings bonds is paid monthly. The bond's interest rate is applied to a fresh principal amount every six months because interest is compounded semi-annually. The total of the former principal and the interest accrued over the preceding six months makes up the new principal.

Briefing:

The present worth of the U.S. Treasury bond is given by:

Future value/(1 + interest rate)(no. of years)

4.475/(1 + 4.25)⁵
2.500/(1.0425)⁵

3634.23

Present worth is  =$3634.23

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