Q1: Present value: Compute the present value of a $100 cash flow for the followi
ID: 2674342 • Letter: Q
Question
Q1: Present value: Compute the present value of a $100 cash flow for the following combinations of discount rates and timesa) r= %8 , t=10 years
b) r= %8, t=20 years
c) r= %4, t= 10 years
d) r= %4, t= 20 years
Q2: Future values. Compute the future value of a $100 cash flow for the same combinations of rates and times as in Q1
Q3: Future values. In 1880 five aboriginal trackers were each promised the equivalent of 100 Australian dollars for helping to capture the notorious outlaw Ned Kelley. In 1993 the granddaughters of two of the trackers claimed that this reward had not been paid. The victorian prime minister stated that if this was ture, the government would be happy to pay the $100. However, the grandaughters also claimed that they were entitled to compound interest. How much was each entitled to if the interest rate was %4? What if it was %8?
Q4: Bond yields. A 30 year treasury bond is issued with face value of $1000, paying interest of $60 per year. If market yields increase shortly after the T-bound is issued, what happens to the bond's
a) Coupon rate?
b) price?
c) yield to maturity?
d) current yield?
q5) Bond yields. If a bond with face value of $1000 and a coupon rate of %8 is selling at a price of $970, is the bond's yield to maturity more or less than %8?
q6) Bond yields. A bond with face value $1000 has a current yield of 6% and a coupn rate of %8. What is the bond's price?
Explanation / Answer
A) 100((1-(1/(1+.08)^10))/.08)=$671.01 B) 100((1-(1/(1+.08)^20))/.08)=$981.81 C) 100((1-(1/(1+.04)^10))/.04)=$811.09 D) 100((1-(1/(1+.04)^20))/.04)=$1359.03 There's the answers to the first Question. Post the other ones in seperate posts and I'll answer them too.
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