How would you calculate the present value of a bond that pays \$500 annually for 10 years and \$5,000 at maturity, given a market interest rate of 5%?

• A. Use the annuity table for both interest and principal payments.
• B. Use the annuity table for interest payments and the lump sum table for the principal payment.
• C. Use the future value table for both interest and principal payments.
• D. Use the lump sum table for both interest and principal payments.

Answer: (B)