A ten-year security pays cash flows of $1,000 a year at the end of each of the next five years t 1, 2, 3, 4, 5) After the fifth year, the security pays some constant cash flow at the end of the nextfour years (t-6, 7, 8, 9) Ten years from now (t-10) the security will mature and pay $10,000. The security sells for $30,000 and promises a rate of return of 6%. What annual cash flow does the securpay for years 6 through 97Multiple Choice

The valuation of securities is based on the concept of time value of money. Thus the value of a…

A ten-year security pays cash flows of $1,000 a year at the end of each of the next five years four years t-6, 7, 8, 9) Ten years from now 10) the security will mature and pay $10,000 pay for years 6 through 97 -1,2,3,4,5) After the fifth year, the security pays some constant cash flow at the end of the next The security sells for $30,000 and promises a rate of retum of 6% What annual cash flow does the seco

A ten-year security pays cash flows of $1,000 a year at the end of each of the next five years four years t-6, 7, 8, 9) Ten years from now 10) the security will mature and pay $10,000 pay for years 6 through 97 -1,2,3,4,5) After the fifth year, the security pays some constant cash flow at the end of the next The security sells for $30,000 and promises a rate of retum of 6% What annual cash flow does the seco

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

See similar textbooks

Similar questions

You pay off a $200, 000 loan at effective annual interest rate 10% by making interest payments each year and paying off the principle in one lump sum at the end of 20 years. You make deposits into a sinking fund earning an effective annual interest rate of 12% at the end of each year in such a way that the total outlay is X for the first 10 years and X + 10, 000 for he next 10 years. Find X.
A fianncial security generates a cash flow of 2 million every five years forever with the first cash flow occuring in two years' time.The appropriate opportunity cost is 10% p.a. compounded annually.What should be the security's price today?
A royalty contract promises a $500,000 sign-up bonus; ten annual royalty payments, starting with $250,000, next year then growing at a rate of 6.5%; and a final bonus (in year ten, together with the last regular payment) of $800,000. If the appropriate discount rate is 10.8%, what is the value of all the payments if this royalty contract is signed today? Use the annuity formula in some of your calculations!
Valuing Delayed Annuities Suppose that you will receive annual payments of $18,650 for a period of 26 years. The first payment will be made 7 years from now. If the interest rate is 10.50%, what is the value of the annuity in year 6, what is the current value of this stream of cash flows? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Value of the Security in Year 6 Value of the Security today LA LA
A security pays you an annual amount of $900 for 10 years. The seller of the security requires the first payment to be made today and the last payment to be made 9 years from today. Interest rate on this security is 5.75 percent per annum. Calculate the present value rounded to 2 decimal places.
A security pays $55 in one year and $133.10 in three years. Present value of this security is $150. The relevant interest rate is %.
A borrower and lender negotiate a $38,000,000 interest-only loan at a 6.0 percent interest rate for a term of 15 years. There is a lockout period of 10 years. Should the borrower choose to prepay this loan at any time after the end of the 10th year, a yield maintenance fee (YMF) will be charged. The YMF will be calculated as follows: A treasury security with a maturity equal to the number of months remaining on the loan will be selected, to which a spread of 150 basis points (1.50%) will be added to determine the lender's reinvestment rate. The penalty will be determined as the present value of the difference between the original loan rate and the lender's reinvestment rate. Required: a. How much will the YMF be if the loan is repaid at the end of year 13 if two year treasury rates are 3 percent? If two-year treasury rates are 5.0 percent, what will be the lender's reinvestment rate? Note: Do not round intermediate calculations, Round "YMF" to the nearest dollar amount. Enter…
A 10%, 4-year annuity pays $500.00 each year. What is the future value of the annuity?
6. You are contemplating the purchase of a twenty-four year (variable) annuity that promises cash flows in the following pattern, repeating every four years: 1e 2e 3e 4e 21e 24 22 23 $1,600- $1,500- $1,400 $1,300- $1,600 $1,500 $1,400 $1,300 Suppose you don't like the fluctuations in the amount of your annual benefits.e a. What annual rate of return would you use to convert these (end-of-year) cash flows to equal annual (end-of-year) amounts if you required an APR of 14.4%, compounded monthly?e b. Without prejudice to your answer in part a, suppose that your required annual rate of return is 15%, what equal annual (beginning-of-year) payments over the twenty-four year period would be equivalent to the cash flow stream depicted above?
1)An asset promises to pay $60 in each of the next three years. Assume the rate of discount is 5% for each of the years. a) Calculate its price the “long” way b) Calculate its price using the annuity formula. 2) For the annuity in #1, what happens to it price if the rate of discount increase to 6%? 3) For the annuity in #2 what happens to it price if: a) its maturity is raised to four years? b) it never matures (a “perpetuity”)?
A five-year $10,000 bond with a 10% coupon rate costs $10,000 and pays its holder $500 every six months for five years, with a final additional payment of $10,000 made at the end of those ten payments Find its present value if the interest rate is: (a) 6%; (b) 10%; (c) 12%. the entire amount of $16.000 now or you can pay $10,000 now

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS