Question

You have a bond that entitles you to a one-time payment of $10,000 one year from now. The interest rate is 10 percent per year. How much is the bond worth today?

Answer 1

$9,090.91

Step-by-step explanation:

The computation of today price is shown below:

Present value = One time payment × (1 + interest rate)^ number of years

= $10,000 × (1 + 0.10)^1

= $10,000 × 0.909090

= $9,090.91

Simply we determine the discount factor and then multiplied it with the one time payment so that estimated value can come