Author Question: You won the lottery and can receive either 1. 60,000 today, or 2. 10,000 one year from today plus ... (Read 87 times)

nenivikky

  • Hero Member
  • *****
  • Posts: 516
You won the lottery and can receive either 1. 60,000 today, or 2. 10,000 one year from today
  plus 25,000 two years from today plus 35,000 three years from today. You plan to use the money
  to pay for your child's college education in 15 years.
 
  You should
  A) take option two because you get 70,000 rather than 60,000 regardless of current interest
  rates.
  B) take the 60,000 today because of the time value of money regardless of current interest rates.
  C) take the 60,000 today if you can earn 6.81 per year or more on your investments.
  D) take the 60,000 today only if the current interest rate is at least 16.67.

Question 2

Skye Industries Inc. bonds currently have 14 years remaining to maturity. What is the yield to maturity of the firm's semi-annual bonds if they carry a face value of 1,000, an annual coupon rate of 8 and have a current price of 885.16?
 
  A) 8.00
  B) 8.75
  C) 9.50
  D) 10.25


Zack0mack0101@yahoo.com

  • Sr. Member
  • ****
  • Posts: 341
Answer to Question 1

C

Answer to Question 2

C
Explanation: C) Via Calculator: N = 142, PMT = 40, FV = 1,000, PV =- 885.16, Solve for ytm = 9.50.



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
 

Did you know?

Every 10 seconds, a person in the United States goes to the emergency room complaining of head pain. About 1.2 million visits are for acute migraine attacks.

Did you know?

There are 20 feet of blood vessels in each square inch of human skin.

Did you know?

A good example of polar molecules can be understood when trying to make a cake. If water and oil are required, they will not mix together. If you put them into a measuring cup, the oil will rise to the top while the water remains on the bottom.

Did you know?

As many as 20% of Americans have been infected by the fungus known as Histoplasmosis. While most people are asymptomatic or only have slight symptoms, infection can progress to a rapid and potentially fatal superinfection.

Did you know?

More than 50% of American adults have oral herpes, which is commonly known as "cold sores" or "fever blisters." The herpes virus can be active on the skin surface without showing any signs or causing any symptoms.

For a complete list of videos, visit our video library