3. Present Value of Annuity and Perpetuity - Show your steps! (You must simplify your answer use the formula for Geometric series.) 1+i A bond with a face value of y pays out interest at rate r annually. The discount rate you should use for the bond is i. (That is, the present value of $1 received a year from now is $11; and the present value of 1 dollar received 2 years from now is $ (1+1)².) What is the present value of owning the bond that pays its first interest a year from now if (a) The bond pays interest for n years and pays back the face value at the last year. (b) The bond pays interest forever and never pays back the face value.

3. Present Value of Annuity and Perpetuity - Show your steps! (You must simplify your answer use the formula for Geometric series.) 1+i A bond with a face value of y pays out interest at rate r annually. The discount rate you should use for the bond is i. (That is, the present value of $1 received a year from now is $11; and the present value of 1 dollar received 2 years from now is $ (1+1)².) What is the present value of owning the bond that pays its first interest a year from now if (a) The bond pays interest for n years and pays back the face value at the last year. (b) The bond pays interest forever and never pays back the face value.

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter11: Liabilities: Bonds Payable

Section: Chapter Questions

Problem 11E

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