eBook What is the present value of a security that will pay $37,000 in 20 years if securities of equal risk pay 11% annually? Do not round intermediate calculations. Round your answer to the nearest cent.

eBook What is the present value of a security that will pay $37,000 in 20 years if securities of equal risk pay 11% annually? Do not round intermediate calculations. Round your answer to the nearest cent.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: What is the present value of a security that will pay $32,000 in 20 years if securities of equal…

A: Future value is the ultimate value of an asset that an investor expects to receive from his…

Q: The investor plans to invest 2000 UAH and chooses between two investment options: one-year bond that…

A: The effective interest rate, also known as the annual equivalent rate (AER) or annual percentage…

Q: Suppose you sell six September 2020 palladium futures contracts this day at the last price of the…

A: Step 1:Number of contract = n = 6Quantity per contract = q = 50 troy ozStrike price = k =…

Q: a-1. What will be your total nominal return over the two years if inflation is 2.3% in the first…

A: Nominal returnThe overall percentage return on investment without adjusting for the effects of…

Q: Consider three securities that will pay risk-free cash flows over the next three years and that have…

A: For $ 100 cash flow received in one year, the price is $ 92.42 For $500 Cash flow, the price…

Q: 4. Alpha Co. has 5,000 shares outstanding and its net income was $25,000. What is its earnings per…

A: given Net income = $25000

Q: You are considering the purchase of Coupon Bond with a face value of $1,000, which matures in…

A: Price is the present value of coupon payments plus the present value of the face value of coupon…

Q: The promised cash flows of three securities are listed below. If the cash flows are risk-free, and…

A: Here, To Find: No-arbitrage price of security =?

Q: Assume only two states will exist one year from today when a call on Delta Transportation, Inc.…

A: A call option is a derivative instrument allowing the holder to purchase the associated asset at a…

Q: What is the present value of a security that will pay $3,000 in 20 years if securities of equal risk…

A: The Formula to Calculate the Present Value =Future Value x 1/(1 + Rate of Interest)^Period (in…

Q: Maturity (years) Price (per $1,000 face value) S904 87 $970 76 $939 38 Suppose you observe that a…

A: Working Note # 1 YTM for Zero Coupon Bond :: 1 Year YTM= (1000/970.76)-1 0.03012073 3.01207%…

Q: The real risk-free rate is 2.15%. Inflation is expected to be 2.15% this year, 4.05% next year, and…

A: Yield on maturity is the return anticipated on a bond at the end of the maturity period of the bond.…

Q: Consider two securities that pay risk-free cash flows over the next two years and that have the…

A: Arbitrage refers to the profit that an investor earns because of the difference in the value of the…

Q: You hold an annual coupon bond for 1 year, receiving the 0.14 coupon before selling. When bought it…

A: Holding period return refers to the return earned from the asset or bond fort he period the asset or…

Q: Explain the meaning of 32 and 12 in the payoff table. Which security would you consider for…

A: 1. Meaning of 32 : It means if you invest in the stock then there are 20% probability that your…

Q: a. What is the present value of a security that will pay $4,000 in 20 years if securities of equal…

A: a) Present value = Future value /(1+rate)^years

Q: The annual payment of a 10-year fixed-income security is $50. The payments are made at the end of…

A: Present value of annuity is computed as follows:-PV= A*wherePV= Present value of annuityA= periodic…

Q: What is the present value of a security that will pay $10,000 in 5 years if securities of equal risk…

A: Present value (PV) is a financial concept used to determine the current worth or value of a sum of…

Q: Two questions: (CLO-2) La. A two-year Treasury security currently earns 1.94%. Over the next two…

A: Rate of return = 1.94% Risk free rate = 1.00% Inflation Premium = 0.50%

Q: one-year treasrury securities yield 5%. the market anticipates that 1 year from now, 1-year treasury…

A: It is assumed that the expectation theory is consistent in the following situation.

Q: What is the present value of a security that will pay $18,000 in 20 years if securities of equal…

A: The objective of this question is to calculate the present value of a security that will pay $18,000…

Q: A 2-year Treasury security currently earns 1.97 percent. Over the next two years, the real risk-free…

A: The market risk premium is the expected future return in excess of risk-free returns on investment.…

Q: What is the present value of a security that will pay $13,000 in 20 years if securities of equal…

A: Present Value refers to a concept that states the discounted value or say value at today's time of…

Q: What is the present value of a $1000 future amount received in 17 years if the appropriate discount…

A: Given:Future Amount (FV) = $1000Discount Rate (r) = 11.7% APR = 0.117Number of years (n) = 17

Q: The real risk-free rate is 2.95%. Inflation is expected to be 3.95% this year, 5.05% next year, and…

A: Yield rate is the expected or actual return from the investment to the investor. It depends upon…

Q: Prices of zero-coupon, default-free securities with face values of $1,000 are summarized in the…

A: Arbitrage opportunity: As a reason of market malfunctions, arbitration opportunities emerge, leading…

Q: The real risk-free rate is 3.25%, and inflation is expected to be 2.25% for the next 2 years. A…

A: We know that the treasury security yield is determined by the addition of risk-free rate, inflation…

Q: Suppose tnat ABC bank decides to purchase a T-note and convert it into a STRIP. The T-note has a…

A: A STRIP is formed when the cashflows (coupons amd Principal) of a bond are separated and traded as a…

Q: If a security currently worth $12,800 will be worth $15,573.16 five years in the future, what is the…

A: Present value is the estimation of the current value of future cash value which is likely to be…

Q: Give only typing answer with explanation and conclusion Consider an eight-month European put option…

A: An option is a type of financial instrument that is based on the value of underlying securities,…

Q: The real risk-free rate is 2.5% and inflation is expected to be 2.25% for the next 2 years. A 2-year…

A: Maturity risk premium refers to the additional return that investors demand for holding longer-term…

Q: Which of the following investments that pay will $9,500 in 14 years will have a lower price today?…

A: The objective of the question is to determine which of the two investments, one earning an interest…

Q: Prices of zero-coupon, default-free securities with face values of $1,000 are summarized in the…

A: An arbitrage opportunity is used to take the advantage of price differential existing in the markets…

Q: eBook Interest rates on 4-year Treasury securities are currently 7%, while 6-year Treasury…

A: Information Provided: 4-year treasury security rate = 7% 6-year treasury security rate = 7.7%

Q: an investor buy a 10,000 par, 4.25 percent annual coupon TIPS security with three years to maturity.…

A: TIPS refers to Treasury Inflation-Protected Securities. These are treasury bonds that protect…

Q: QUESTION 1 An investor buys a $10,000 par, 5% coupon (semiannual payments) TIPS security with two…

A: TIPS Security Par value = $10,000Couppon rate = 5%Maturity in 2 yearsInflation rate = 2.4%

Q: What is the present value of a security that will pay $6,000 in 20 years if securities of equal risk…

A: Present value (PV) is the current value of a future sum of money or stream of cash flows given a…

Q: Suppose you sell seven March 2021 silver futures contracts on December 4, 2020, at the last price of…

A: Short position refers to the situation where an investor sell the contract without having the asset…

Question

100%

Check My Work
eBook
What is the present value of a security that will pay $37,000 in 20 years if securities of equal risk pay 11% annually? Do not round intermediate calculations. Round your
answer to the nearest cent.
2$

Expert Solution

Step 1

Discount Factor:

Discount Factor is a determinant that finds out the present value of future cash flows. Discounting is the main factor that is used in discounting the flow cash. Discount Factor is computed by aggregating the discount rates to one and raising the rate to present value compounded for the number of periods.

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

An investor buys a $10,000 par, 5% coupon (semiannual payments) TIPS security with two years to maturity. If inflation every six months over the two years is 1.2 percent, what is the final payment (principal and interest) the TIPS Investor will receive? Input your final answer using two decimal places. Do not round intermediate calculations.
What is the present value of a security that will pay $18,000 in 20 years if securities of equal risk pay 8% annually? Round your answer to the nearest cent.
OLL Ltd has just issued a perpetual (that is, non-maturing) financial security that is expected to pay an annual coupon of $120 next year. This coupon will then decline at a rate of 2% per annum forever. If the interest rate on this security is 8% p.a., its price today should be closest to: Group of answer choices $1,200. $1,500. $2,000. $6,000.
eBook The real risk-free rate is 2.25%. Inflation is expected to be 3.25% this year, 4.95% next year, and 2.5% thereafter. The maturity risk premium is estimated to be 0.05 x (t-1) %, where t = number of years to maturity. What is the yield on a 7-year Treasury note? Do not round intermediate calculations. Round your answer to two decimal places. %
How much would you pay for a zero coupon bond with a par value of $1000, a maturity of 21 years, if your required rate of return is 6.1%? Assume annual discounting. (Round your answer to the nearest penny.)
eBook The real risk-free rate is 2.5% and inflation is expected to be 2.75% for the next 2 years. A 2-year Treasury security yields 6.25%. What is the maturity risk premium for the 2-year security? Round your answer to one decimal place. %
What is the present value of a security that will pay $3,000 in 20 years if securities of equal risk pay 11% annually?
Consider a forward contract which allows you to buy/sell a non-dividend paying stock in three months. Assume the current stock price is $99.41 and the three-month risk free interest is 5.4 percent per year. What should be the forward price? Keep your answer to two decimal places.
Suppose you purchase a ten-year bond with 12% annual coupons. You hold the bond for four years and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 10.64% when you purchased and sold the bond, a. What cash flows will you pay and receive from your investment in the bond per $100 face value? b. What is the internal rate of return of your investment? Note: Assume annual compounding. a. What cash flows will you pay and receive from your investment in the bond per $100 face value? The cash flow at time 1-3 is $ (Round to the nearest cent. Enter a cash outflow as a negative number.) The cash outflow at time 0 is $ number.) (Round to the nearest cent. Enter a cash outflow as a negative The total cash flow at time 4 (after the fourth coupon) is $. (Round to the nearest cent. Enter a cash outflow as a negative number.) b. What is the internal rate of return of your investment? The internal rate of return of your investment is %. (Round to two decimal…
You have been provided with the following options. a. A 10-year, R1000 face value, 10 percent coupon bond with semiannual interest payments. b. A 10-year, R1000 face value, 10 percent coupon bond with annual interest payments. C.A 10-year, R1000 face value, zero coupon bond. d. A 10-year R100 annuity. ) Determine which one poses the highest price risk
How much should an investor be willing to pay now for 10%, P 50, 000.00 bond that will mature in 25 years and pays interest semi-annually, if it wants to make 12% nominal interest compounded semi-annually on a bond investment Given: Required: Solution: refer to this textbook: https://drive.google.com/file/d/1h4ra80IE8IRtYyja16iK6TtjCrTDi73j/view?usp=sharing
What is the present value of a security that will pay $17,000 in 20 years if securities of equal risk pay 8% annually? Do not round intermediate calculations. Round your answer to the nearest cent.