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ozzi
3 years ago
11

Suppose a U.S. Treasury bond will pay $2,500 five years from now. If the prevailing interest rate on 5-year Treasury bonds is 4.

25%, compounded semiannually, the value of the bond today is closest to:
Business
1 answer:
Morgarella [4.7K]3 years ago
5 0

Answer:

The value of the bond today is closest to $1648.85

Explanation:

The value of the bond today is closest to:

Present Value = FV / (1+i)^n *m

FV= 2500

I = 4.25 = 0.0425

N= 5

M= 2

The value of the bond today = 2500 / (1+0.0425) ^5*2

The value of the bond today = 2500 / 1.516214468

The value of the bond today = 1648.853256

The value of the bond today = $1648.85

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