Question

poline Gorna memo, Jul purchased covers and sing . Today, How long as the owned and the proof the land has been re 4100 p ort p our 2000 years 0.28 ya 31.20 y 32.08 years L Multiple Choloo 05-04 How an investment to O long t o ruch der Section 3 points You are scheduled to r e p ayment of 10 forgathathened 7 year. The 10 percent, What is the difference in the present value If you are the payments al the beginning of each your rather than at the end of each year? $2,483 . $2,513 $2,721 $2,727 $2,804 Multiple Choice Leaming objectives 08-01 How to determine the future and premont value of livestments with multiple cash flow Section 6.2 2 ..2 points oll Well Supply offers 7.5 percent coupon bonds with serannual payments and a yield to maturity of 7.88 percent. The bonds mature in yours. What is the main prio por bond If the foo value is $1,000 $980.70 $991 A2 $996.48 $1,002.60 $1,013,48

Answer 1

Q1

(1+i)ⁿ * Present value = future value

present value = $36900

future value =214800

i =0.06

n=??

n= log_1.06 ( future / present value) = 30.23 years Option C

Q2

Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=$5100[1-(1.10)^-7]/0.10

=$24828.94(Approx).

Present value of annuity due=Present value of annuity*(1+interest rate)

=$24828.94*1.10

=$ 27311.83(Approx)

Hence difference =$27311.83-24828.94

= $ 2483 Option A

Q3

Annual coupon payment = 7.5%*$1,000 = $75
Semi annual payment = $37.5

yield to maturity for semi annual payment =7.68/2 = 3.84 %

Price = $37.5/(1.0384) + $37.5/(1.0384)^2 +$37.5/(1.0384)^3 + $37.5/(1.0384)^4...+
$37.5/(1.0384)^12
= $991.47 Option B

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