5. You have won the California Lottery's new game and may choose from the following prizes: (1) $2,000 cash now. (2) $800 a year for three years with the payments starting in one year. (3) $200 per year forever, starting in one year. a $5,000 zero-coupon bond that matures in 10 years. (Here, the holder of the bond gets one payment of $5,000 after 10 years and no coupon payments.) (4)

5. You have won the California Lottery's new game and may choose from the following prizes: (1) $2,000 cash now. (2) $800 a year for three years with the payments starting in one year. (3) $200 per year forever, starting in one year. a $5,000 zero-coupon bond that matures in 10 years. (Here, the holder of the bond gets one payment of $5,000 after 10 years and no coupon payments.) (4)

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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Similar questions

Find the interest rates earned on each of the following. Round your answers to the nearest whole number. a. You borrow $660 and promise to pay back $759 at the end of 1 year. % b. You lend $660 and the borrower promises to pay you $759 at the end of 1 year. % c. You borrow $69,000 and promise to pay back $109,495 at the end of 6 years. % d. You borrow $11,000 and promise to make payments of $3,359.50 at the end of each year for 5 years. %
3. A man is considering to buy a 20-year corporate bond. The bond has a face value of $1,000 and pays 6% interest per year in two semi-annual payments and in addition he will receive $1,000 at the end of 20 years, along with the last interest payment. If the investor believes he should receive 8% annual interest, compounded semi-annually, what will be the amount he is willing to pay for the bond?
subject :- Account
Assume that you can invest to earn a stated annual rate of return of 12 percent, but where interest is compounded semiannually. If you make 20 consecutive semiannual deposits of $500 each, with the first deposit being made today, what will your balance be at the end of Year 20? Group of answer choices $52,821.19 $57,900.83 $58,988.19 $62,527.47 $64,131.50
Use Excel or Google Open Source Spreadsheet for this problem: You own a 4 year bond that has a face value of $12,000 and pays 8% a year in interest, once a year, at the end of the year. Two years after buying it, the interest rate increases to 10%. You do not want to wait 2 more years to get your principle of $12,000 back because you really need the money, so you decide to sell it on the open market. 1. How much can you sell it for? 2. Would it be a capital loss or gain and how much? How much is the capital gain or loss?
My pension plan will pay me $10,500 once a year for a 10-year period. The first payment will come in exactly five years. The pension fund wants to immunize its position. Required: a. What is the duration of its obligation to me? The current interest rate is 5.0% per year. b. If the plan uses 5-year and 20-year zero-coupon bonds to construct the immunized position, how much money ought to be placed in each bond? c. What will be the face value of the holdings in each zero? Complete this question by entering your answers in the tabs below. Required A Required B Required C What is the duration of its obligation to me? The current interest rate is 5% per year. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Duration years
Suppose you just won the state lottery, and you have a choice between receiving $2,550,000 today or $270,000 a year for 18 years, with the first payment starting one year from today. What annual interest rate does the second choice provide? 6.75% 7.49% 7.89% 6.28%
Future value (with changing years). Dixie Bank offers a certificate of deposit with an option to select your own investment period. Jonathan has $6,000 for his CD investment. If the bank is offering a 5.5% interest rate, compounded annually, how much will the CD be worth at maturity if Jonathan picks a a. two-year investment period? b. five-year investment period? c. eight-year investment period? d. twenty-year investment period? a. How much will the $6,000 CD investment at 5.5% interest rate be worth at maturity if Jonathan picks a 2-year investment period? $4 (Round to the nearest cent.) %24
QUESTION 1 Sam Hill has just won the state lottery, paying $70,000 yearly for the next 20 years. Sam will receive his first payment today. If the interest rate is 5%, what is the present value of his lottery winnings? (Enter a positive value and round to 2 decimals) QUESTION 2 The United Kingdom has a consol bond pays a $150 coupon every 6 months (semi-annually), forever. If the next payment is due precisely six months from today and the discount rate is 10.75% APR (compounded semi-annually), then calculate the present value of this investment. (Round to 2 decimals) [ i need 1,2]
ABC Inc. borrows money at 9%, sells bonds at 8%, and the purchasers of common stock require 13% rate of return. If the company has borrowed $40 million, sold $60 million in bonds, and sold $100 million worth of common stocks, what is the Weighted Average Cost of Capital (WACC)? If the same company from the previous question used 5% ROR for loans, 9% ROR for bonds, and 12% ROR for stocks, and also used a 50% tax rate, what is the WACC?
Find the interest rates earned on each of the following. Round your answers to the nearest whole number. a. You borrow $700 and promise to pay back $777 at the end of 1 year. % b. You lend $700 and the borrower promises to pay you $777 at the end of 1 year. % c. You borrow $88,000 and promise to pay back $550,376 at the end of 15 years. % d. You borrow $20,000 and promise to make payments of $6,687.60 at the end of each year for 5 years. %
11. Jared wants to invest money in a 6% savings account that compounds semiannually. Jared would like the account to have a balance of $110,000 2-years from now. How much must Jared deposit to accomplish his goal? 12. Pathfinder issues a bond with a coupon rate of 9%, face amount of $50,000, and is due in 5 years. Interest payments are made semi-annually. The effective rate for this type of bond is 10%. What is the issue price of the bond? (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

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