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# Time Value of Money Concepts - Present Value

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Suppose a State of Maryland bond will pay \$1,000 eight years from now. If the going interest rate on these 8-year bonds is 5.5%, how much is the bond worth today?

You inherited an oil well that will pay you \$25,000 per year for 25 years, with the first payment being made today. If you think a fair return on the well is 7.5%, how much should you ask for it if you decide to sell it?

A. \$284,595
B. \$299,574
C. \$314,553
D. \$330,281

#### Solution Preview

Please refer to the attached Excel file for better understanding of formulas in MS Excel.

Suppose a State of Maryland bond will pay \$1,000 eight years from now. If the going interest rate on these 8-year bonds is 5.5%, how much is the bond worth today?

FV of ...

#### Solution Summary

There are two problems. Solutions to these problems explain the methodology to calculate present value in the given cases with the help of functions in MS Excel.

\$2.19