Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:### Bond Yield Question
The Sisyphian Company has a bond outstanding with a face value of $5,000 that reaches maturity in nine years. The bond certificate indicates that the stated coupon rate for this bond is 8.3% and that the coupon payments are to be made semiannually.
Assuming that this bond trades for $5,561, then the YTM (Yield to Maturity) for this bond is closest to:
- **A. 5.3%**
- **B. 9.28%**
- **C. 7.95%**
- **D. 6.63%**
![**Question:**
An annuity pays $49 per year for 16 years. What is the future value (FV) of this annuity at the end of those 16 years, given that the discount rate is 9%?
**Options:**
- A. $1,940.60
- B. $1,617.17
- C. $970.30
- D. $2,264.04
**Explanation:**
To solve this question, one would use the Future Value of Annuity formula, which calculates the future value of a series of equal payments at regular intervals, taking into account a specified interest or discount rate. The formula is:
\[ FV = P \times \frac{(1 + r)^n - 1}{r} \]
Where:
- \( P \) is the payment amount ($49),
- \( r \) is the interest rate (9% or 0.09),
- \( n \) is the number of periods (16 years).
By plugging in the values:
\[ FV = 49 \times \frac{(1 + 0.09)^{16} - 1}{0.09} \]
\[ FV = 49 \times \frac{3.6042 - 1}{0.09} \]
\[ FV ≈ 49 \times 28.9355 \]
\[ FV ≈ 2,264.04 \]
Therefore, the correct answer is D. $2,264.04.](https://content.bartleby.com/qna-images/question/3f8a7250-9137-47ef-be98-4b87422d4696/98d416b9-1eaf-4ace-9f99-5786eee65626/ybnr0hi_processed.jpeg)
Transcribed Image Text:**Question:**
An annuity pays $49 per year for 16 years. What is the future value (FV) of this annuity at the end of those 16 years, given that the discount rate is 9%?
**Options:**
- A. $1,940.60
- B. $1,617.17
- C. $970.30
- D. $2,264.04
**Explanation:**
To solve this question, one would use the Future Value of Annuity formula, which calculates the future value of a series of equal payments at regular intervals, taking into account a specified interest or discount rate. The formula is:
\[ FV = P \times \frac{(1 + r)^n - 1}{r} \]
Where:
- \( P \) is the payment amount ($49),
- \( r \) is the interest rate (9% or 0.09),
- \( n \) is the number of periods (16 years).
By plugging in the values:
\[ FV = 49 \times \frac{(1 + 0.09)^{16} - 1}{0.09} \]
\[ FV = 49 \times \frac{3.6042 - 1}{0.09} \]
\[ FV ≈ 49 \times 28.9355 \]
\[ FV ≈ 2,264.04 \]
Therefore, the correct answer is D. $2,264.04.
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- Help neededarrow_forwardAtlas Corp. is considering two mutually exclusive projects. Both require an initial investment of $11,500 at t = 0. Project S has an expected life of 2 years with after-tax cash inflows of $6,000 and $7,600 at the end of Years 1 and 2, respectively. Project L has an expected life of 4 years with after-tax cash inflows of $4,283 at the end of each of the next 4 years. Each project has a WACC of 9.00%, and Project S can be repeated with no changes in its cash flows. The controller prefers Project S, but the CFO prefers Project L. How much value will the firm gain or lose if Project L is selected over Project S, i.e., what is the value of NPVL - NPVS? a. $1,501.42 b. $1,014.46 c. $ 1,783.84 d. $1,636.55 e. $1,313.76arrow_forwardPlease don't provide handwrittin solution....arrow_forward
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