« previous next »

Author Question: You won the lottery and can receive either 1. 60,000 today, or 2. 10,000 one year from today plus ... (Read 50 times)

nenivikky

  • Hero Member
  • *****
  • Posts: 516
on: Jul 11, 2018
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
Foundations of Finance ¦ Keown, Petty, Martin ¦ 9th Edition
Buy Test-Bank


Zack0mack0101@yahoo.com

  • Sr. Member
  • ****
  • Posts: 341
Reply #1 on: Jul 11, 2018
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
« previous next »
 

Did you know?

Blood in the urine can be a sign of a kidney stone, glomerulonephritis, or other kidney problems.

Did you know?

Allergies play a major part in the health of children. The most prevalent childhood allergies are milk, egg, soy, wheat, peanuts, tree nuts, and seafood.

Did you know?

The Babylonians wrote numbers in a system that used 60 as the base value rather than the number 10. They did not have a symbol for "zero."

Did you know?

Your skin wrinkles if you stay in the bathtub a long time because the outermost layer of skin (which consists of dead keratin) swells when it absorbs water. It is tightly attached to the skin below it, so it compensates for the increased area by wrinkling. This happens to the hands and feet because they have the thickest layer of dead keratin cells.

Did you know?

To prove that stomach ulcers were caused by bacteria and not by stress, a researcher consumed an entire laboratory beaker full of bacterial culture. After this, he did indeed develop stomach ulcers, and won the Nobel Prize for his discovery.

A 100-Year Flood Map of Montpelier, Vermont A 100-Year Flood Map of Montpelier, Vermont
For the 2-year-old, encounters with peers provide valuable practice in communication and social ... For the 2-year-old, encounters with peers provide valuable practice in communication and social ...
W-2 form issued to employees at the end of the year. W-2 form issued to employees at the end of the year.
In early capitalism, children worked alongside adults. At that time, just as today, most street ... In early capitalism, children worked alongside adults. At that time, just as today, most street ...
Charlie Stone wants to retire in 30 years, and he wants to have an annuity of $1000 a year for ... Charlie Stone wants to retire in 30 years, and he wants to have an annuity of $1000 a year for ...
Chinese Dragon new year 2024 Chinese Dragon new year 2024
Video: Mechanisms of capillary exchange

For a complete list of videos, visit our video library