Answer:
$413.20
Explanation:
To find the present value of the bond, we need to calculate the amount of money Sofia would need to have today in order to receive $500 in 5 years, considering an interest rate of 3% with monthly compounding.
The formula we can use to calculate the present value is:
Present Value = Future Value / (1 + interest rate)^n
Where: - Future Value is the amount the bond will be worth at maturity ($500) - Interest rate is the annual interest rate (3% or 0.03) - n is the number of compounding periods (5 years * 12 months = 60 months)
Plugging in the values into the formula, we have:
Present Value = $500 / (1 + 0.03/12)^60
Calculating this expression, we get:
Present Value ≈ $413.20 (rounded to the nearest cent)