A $50 U.S. Savings Bond paying 6.22% compounded monthly matures in 11 years 2 months. What is the present value of the bond?

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- Oct 26th 2008, 07:42 AMdc52789Finding present value
A $50 U.S. Savings Bond paying 6.22% compounded monthly matures in 11 years 2 months. What is the present value of the bond?

- Oct 26th 2008, 07:55 AMJhevon
the formula for the present value, $\displaystyle P$, is given by

$\displaystyle P = \frac F{(1 + r)^n}$

where $\displaystyle F$ is the future value of the money, in this case, the value at maturity, $\displaystyle r$ is the interest rate in decimal form, and $\displaystyle n$ is the number of years it will take to get to $\displaystyle F$, which in this case, is $\displaystyle \frac {67}6 \approx 11.167$.

now to find $\displaystyle F$, use the regular compound interest formula, then plug it into the formula above to find the present value - Oct 26th 2008, 08:03 AMdc52789
- Oct 26th 2008, 08:07 AMJhevon
what i gave you are definitions. and the 67/6 is 11 years and 2 months. this is 11 years and 2/12 years, which is 67/2 years if you add those fractions, or 11.167 years.

the formula for P is the present value, which is what you are after. and i told you what the pieces of the formula are. so just find them one by one. r and n were given, now find F as directed - Oct 26th 2008, 08:19 AMdc52789
- Oct 26th 2008, 08:44 AMJhevon
- Oct 26th 2008, 08:49 AMdc52789
- Oct 26th 2008, 08:54 AMJhevon
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- Oct 26th 2008, 09:20 AMJhevon
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- Oct 26th 2008, 09:48 AMJhevon
- Oct 26th 2008, 09:56 AMdc52789
- Oct 26th 2008, 10:00 AMJhevon
- Nov 5th 2008, 09:11 PMdc52789