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Question
Use the following tables to compute the present value of a $25,000, 7%, 5-year bond that pays $1,750 ($25,000 × 7%) interest annually, if the market rate of interest is 7%.
Present Value of $1 at Compound Interest
| Periods | 5% | 6% | 7% | 10% |
| 1 | 0.95238 | 0.94340 | 0.93458 | 0.90909 |
| 2 | 0.90703 | 0.89000 | 0.87344 | 0.82645 |
| 3 | 0.86384 | 0.83962 | 0.81630 | 0.75131 |
| 4 | 0.82270 | 0.79209 | 0.76290 | 0.68301 |
| 5 | 0.78353 | 0.74726 | 0.71299 | 0.62092 |
| 6 | 0.74622 | 0.70496 | 0.66634 | 0.56447 |
| 7 | 0.71068 | 0.66506 | 0.62275 | 0.51316 |
| 8 | 0.67684 | 0.62741 | 0.58201 | 0.46651 |
| 9 | 0.64461 | 0.59190 | 0.54393 | 0.42410 |
| 10 | 0.61391 | 0.55839 | 0.50835 | 0.38554 |
Present Value of Annuity of $1 at Compound Interest
| Periods | 5% | 6% | 7% | 10% |
| 1 | 0.95238 | 0.94340 | 0.93458 | 0.90909 |
| 2 | 1.85941 | 1.83339 | 1.80802 | 1.73554 |
| 3 | 2.72325 | 2.67301 | 2.62432 | 2.48685 |
| 4 | 3.54595 | 3.46511 | 3.38721 | 3.16987 |
| 5 | 4.32948 | 4.21236 | 4.10020 | 3.79079 |
| 6 | 5.07569 | 4.91732 | 4.76654 | 4.35526 |
| 7 | 5.78637 | 5.58238 | 5.38929 | 4.86842 |
| 8 | 6.46321 | 6.20979 | 5.97130 | 5.33493 |
| 9 | 7.10782 | 6.80169 | 6.51523 | 5.75902 |
| 10 | 7.72173 | 7.36009 | 7.02358 | 6.14457 |
Answer
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