Computing a bond's present value
Now that you've calculated future value from present value, it should be trivial to reverse the process.
Recall from the video that if you expect to receive $100 one year from now, the present value of that $100 will be less today (because you prefer to have the money sooner than later). Moreover, if we expect to receive $100 two years from now, the value of that will be less than the present value of $100 one year now.
In this exercise, you will calculate the present value of fv1 and fv2 assuming an r (interest rate) of 0.10, where fv1 is a future value one year from now and fv2 is a future value two years from now.
The objects fv1, fv2, and r, which you generated in the previous exercise, are available in your workspace.
This exercise is part of the course
Bond Valuation and Analysis in R
Exercise instructions
- Use basic mathematical operations in R to calculate the present value of
fv1. Save this topv1. - Repeat this process to calculate the present value of
fv2. Save this topv2.
Hands-on interactive exercise
Have a go at this exercise by completing this sample code.
# Calculate pv1
pv1 <- ___ / (1 + ___)
# Calculate pv2
pv2 <-
# Print pv1 and pv2