Ask Question
13 December, 01:16

Suppose a State of New Mexico bond will pay $1,000 eight years from now. If the going interest rate on these 8-year bonds is 5.5%, how much is the bond worth today

+1
Answers (1)
  1. 13 December, 01:43
    0
    The bond worth as at today is $6,335.

    Explanation:

    Annuity factor @ 5.5% at year 8 = (1 - (1+5.5%) ^-8) /.055 = 6.335

    Hence, Present Value of $1000 payable in eight year time = 6.335 * $1000

    = $6,335

    Hence, the bond value as at today is $6,335.

    This calculation is done assuming there is no redemption value.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Suppose a State of New Mexico bond will pay $1,000 eight years from now. If the going interest rate on these 8-year bonds is 5.5%, how much ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers