Answer:
The present value of the bond is $7,921
Explanation:
PV: present value
FV: future value
Assuming you are buying a zero coupon value:
If the interest rate is 6% (0.06), after the first year the amount should become FV1 = PV x (1+0.06) for principal an interest.
All of that should earn interest in the second year to become FV2 = FV1 x (1+0.06) = PV x [tex](1+0.06)^{2}[/tex]
At the end of four years the value of the bond should be PV x [tex](1+0.06)^{4}[/tex]
=> PV = $10,000/ [tex](1.06)^{4}[/tex]= $7,921
