17. On January 1", a woman in a mascot costume gives you $50. She promises to give you $60 again at the beginning of the next 4 years (meaning the next payment comes at the beginning of the next year). Given that you can invest these funds into an account that pays 3% compounded annually, what is the present value of this stream of cash flows? a. $212.47 b. $235.85 C) $249.27 d. $286.42 e. $307.18
17. On January 1", a woman in a mascot costume gives you $50. She promises to give you $60 again at the beginning of the next 4 years (meaning the next payment comes at the beginning of the next year). Given that you can invest these funds into an account that pays 3% compounded annually, what is the present value of this stream of cash flows? a. $212.47 b. $235.85 C) $249.27 d. $286.42 e. $307.18
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:17. On January 1", a woman in a mascot costume gives you $50. She promises to give you
$60 again at the beginning of the next 4 years (meaning the next payment comes at the
beginning of the next year). Given that you can invest these funds into an account that
pays 3% compounded annually, what is the present value of this stream of cash flows?
a. $212.47
b. $235.85
C $249.27
d. $286.42
e. $307.18
18. Reginald buys a bond with 5 remaining years to maturity. The bond has a coupon rate of
5% paid annually and a par value of $1,000. If he pays $975 for the bond, what is the
capital gains yield?
а. .46%
6 .56%
C. .66%
d. .76%
e. .86%
Transcribed Image Text:20. Blair owns a bond with 5 remaining years to maturity. Serena owns a bond with 10
remaining years to maturity. Both bonds are valued at par and have the same coupon
rate and par value. Suppose the interest rate declines. Do the bonds increase or
decrease in value, and whose bond is affected most?
a. Both bonds increase in value; Blair's bond increases more
b. Both bonds increase in value; Serena's bond increases more
. Both bonds decrease in value; Blair's bond decreases more
@ Both bonds decrease in value; Serena's bond decreases more
e. Both bonds stay the same price
be
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