Answer to Question #216827 in Finance for Red

Question

Time value An Iowa state savings bond can be converted to $100 at maturity 6 years
from purchase. If the state bonds are to be competitive with U.S. savings bonds, which
pay 8% annual interest (compounded annually), at what price must the state sell its
bonds? Assume no cash payments on savings bonds prior to redemption

Answer 1

By Excel function

=PV(B4,B3,0,B2)

The price at which the state can sell its bond is at $63.02.