What would it cost to buy a bill that pays $10,000 after 6 months where the simple annual interest rate is 4.75%?

Question

What would it cost to buy a  bill that pays $10,000 after 6 months where the simple annual interest rate is 4.75%?

 

Answer 1

the underlying formula that you want to use to solve this one is

PV = FV / (1 + rt)

in this scenario that means taking

PV = 10000 / (1 + 0.0475 * 0.5)

PV = 10000 / 1.02375

PV = 9768.01

meaning that the cost in this scenario would be $9,768.01

Answer 2

P * 0.0475/2 = 10000

 

 

P = 10000 *2/ 0.0475 = 421052.63