Appropriate discount rate to apply for all three instruments

Assignment Help Financial Management

Reference no: EM131825431

Which of the following assets is worth the most? Which is worth the least? a) a 25 year, $1,500,000 zero-coupon (no interest) bond b) a 40 year annuity paying $25,000 per year c) a new 10 year bond that pays $20,000 per year in interest income plus the return of the principal of $400,000 at maturity For purposes of this problem, assume that we have determined that an appropriate discount rate to apply for all three instruments is 3%. Assume also that all payments occur at the ends of years involved.

Reference no: EM131825431

Questions Cloud

Present worth of the anticipated revenue stream : What would be the present worth of the anticipated revenue stream at an interest rate of 12% compounded annually over the next 7 years?

Using net present value analysis : Using Net Present Value (NPV) analysis, should you replace the old machine with the more efficient machine if your required rate of return is 12% per year?

Draw payoff diagram at expiry of the trading strategy : Draw a payoff diagram at expiry of the trading strategy which illustrates what potential payoffs could be generated.

Earn the yield to maturity over the life of the bond : Why is it so rare for a bond holder to earn the yield to maturity over the life of the bond?

Appropriate discount rate to apply for all three instruments : Assume that we have determined that an appropriate discount rate to apply for all three instruments is 3%.

Assuming constant debt–equity ratio : how much new borrowing will take place in the coming year, assuming a constant debt–equity ratio?

Prepare an adjusted trial balance and closing entries : Prepare an adjusted trial balance. Prepare a post-closing trial balance. Prepare closing entries.

Prepare production schedule and inventory schedule : Prepare a production schedule, an inventory schedule, and cost of goods sold schedule for the three months.

Enterprise value-ebitda multiple for this company : What is the enterprise value-EBITDA multiple for this company?

User Account

All Pages