How do investors calculate the net present value of a bond? If a bond's coupon payment is C, the interest rate is R, and the bond's coupon payment is made in each period for T years at which time the original principal, P, is repaid, then the bond's present discounted value (PDV) is C C A. PDV = (1 + R) (1+ R)2 (1 + R)T O B. PDV = C(1 + R) + C(1+ R)2 + . + C(1 + R)T + P(1 + R)T. ... C C OC. PDV = + P + + + R R2 RT O D. PDV =P+ + (1 + R) (1+ R)2 (1 + R)T C O E. PDV = - + + (1 + R) (1+ R² (1 + R)T (1 + R)T If the interest rate is 9 percent, what is the present value of a perpetuity that pays $50,000 each year, forever? The perpetuity's value is $ (Enter a numeric response rounded to two decimal places.)
How do investors calculate the net present value of a bond? If a bond's coupon payment is C, the interest rate is R, and the bond's coupon payment is made in each period for T years at which time the original principal, P, is repaid, then the bond's present discounted value (PDV) is C C A. PDV = (1 + R) (1+ R)2 (1 + R)T O B. PDV = C(1 + R) + C(1+ R)2 + . + C(1 + R)T + P(1 + R)T. ... C C OC. PDV = + P + + + R R2 RT O D. PDV =P+ + (1 + R) (1+ R)2 (1 + R)T C O E. PDV = - + + (1 + R) (1+ R² (1 + R)T (1 + R)T If the interest rate is 9 percent, what is the present value of a perpetuity that pays $50,000 each year, forever? The perpetuity's value is $ (Enter a numeric response rounded to two decimal places.)
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:How do investors calculate the net present value of a bond?
If a bond's coupon payment is C, the interest rate is R, and the bond's coupon payment is made in each period
for T years at which time the original principal, P, is repaid, then the bond's present discounted value (PDV) is
C
A. PDV =
+
(1 + R) (1 + R?
(1 + R)T
B. PDV = C(1 + R) + C(1 + R)2 -
+ C(1 + R)T + P(1 + R)T
+
C
P
OC. PDV =
- +
R R2
RT
RT
C
D. PDV = P +
C
C
(1 + R) (1+R)2
(1 + R)T
C
E. PDV =
+
+
+
+
(1 + R) (1+ R)2
(1 + R)T (1 + R)T
If the interest rate is 9 percent, what is the present value of a perpetuity that pays $50,000 each year, forever?
The perpetuity's value is $
(Enter a numeric response rounded to two decimal places.)
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