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3 July, 09:30

Calculate the present value of a $1,000 discount bond with five years to maturity if the yield to maturity is 6%.

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  1. 3 July, 11:28
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    The present value of the bond is $747.25

    Explanation:

    In order to find the present value of a bond we need to know its future value, its years to maturity, its yield to maturity and its payments. The question tells us that is a discount bond which means it has 0 payments and it tells us the other 3 variables. We will put these variables in a financial calculator in order to find the present value.

    FV = 1000

    N=5

    PMT=0

    I=6

    Compute present value = 747.25
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