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26 September, 12:07

Assume you invest money in a bond that will pay you $250,000 in four years. the bond has an annual interest rate of 5%. you do not receive interest payments while you own the bond; it is zero-coupon. what is the bond's present value?

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  1. 26 September, 12:56
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    The formula of the present value of the bond is

    Pv=Fv: (1+r) ^t

    Fv 250000

    R 0.05

    T 4 years

    Pv=250,000: (1+0.05) ^ (4)

    Pv=205,675.6 round your answer to get 205676
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