Thread: Finding 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?

Originally Posted by dc52789

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?

the formula for the present value, , is given by



where is the future value of the money, in this case, the value at maturity, is the interest rate in decimal form, and is the number of years it will take to get to , which in this case, is .

now to find , use the regular compound interest formula, then plug it into the formula above to find the present value

Originally Posted by Jhevon

the formula for the present value, , is given by



where is the future value of the money, in this case, the value at maturity, is the interest rate in decimal form, and is the number of years it will take to get to , which in this case, is .

now to find , use the regular compound interest formula, then plug it into the formula above to find the present value

I don't get all that and I have no idea how you get 67/6.

Originally Posted by dc52789

I don't get all that and I have no idea how you get 67/6.

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

Originally Posted by Jhevon

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

Um...I got 25 as my answer. is it correct?

Originally Posted by dc52789

Um...I got 25 as my answer. is it correct?

nope, using 3 decimal places, i got $50.95

it should be close to the principal, but a little bigger, unless you're losing money, which we're not

what did you get for F?

Originally Posted by Jhevon

nope, using 3 decimal places, i got $50.95

it should be close to the principal, but a little bigger, unless you're losing money, which we're not

what did you get for F?

I don't know how you get that.
So...
n = 12
r = .0622
t = 11.167
I don't know which one the $50 go to.

Originally Posted by dc52789

I don't know how you get that.
So...
n = 12
r = .0622
t = 11.167
I don't know which one the $50 go to.

the 50 is the P (principal) in the compound interest formula

Originally Posted by Jhevon

the 50 is the P (principal) in the compound interest formula

I did that and still got 25
I did it like this
50(1+(0.0622/12))^(-12x11.167)

Originally Posted by dc52789

I did that and still got 25
I did it like this
50(1+(0.0622/12))^(-12x11.167)

where did the minus sign in your formula come from?

using that same formula, without the minus sign, i get 99.96 for that. use that as F in the first formula i gave

Originally Posted by Jhevon

where did the minus sign in your formula come from?

using that same formula, without the minus sign, i get 99.96 for that. use that as F in the first formula i gave

then, the answer would be 48.46

Originally Posted by dc52789

then, the answer would be 48.46

what exactly are you doing?

i double checked and got the same answer as last time. i think you're probably plugging in things in your calculator wrong

Originally Posted by Jhevon

what exactly are you doing?

i double checked and got the same answer as last time. i think you're probably plugging in things in your calculator wrong

This is what I did.
99.96/(1+0.0622)^12 = 48.46

Originally Posted by dc52789

This is what I did.
99.96/(1+0.0622)^12 = 48.46

in the present value formula, n is the number of years, not the number of times it is compounded. you should have 11.167, not 12

Originally Posted by Jhevon

in the present value formula, n is the number of years, not the number of times it is compounded. you should have 11.167, not 12

I just realized that this may not be the right answer. There's no way the answer could be $50.95.