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19 March, 16:13

You are considering a savings bond that will pay $ 100 in 9 years. If the interest rate is 1.9 % , what should you pay today for the bond?

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  1. 19 March, 16:54
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    You should pay $84.42 today for the bond.

    Explanation:

    bond price = value of bond/[ (1 + interest rate) ^number of years]

    = $100/[ (1 + 1.9%) ^9]

    = $100 / (1.185)

    = $84.42

    Therefore, You should pay $84.42 today for the bond.
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