Compute present value for bond that promises to pay interest

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Problem 1: Assume that you are given a choice between incurring an immediate outlay of Rs 10,000 and having to pay Rs 2,310 a year for 5 years (first payment due one year from now); the discount rate is 11 per cent. What would be your choice? Will your answer change if Rs 2,310 is paid in the beginning of each year for 5 years?

Problem 2: Compute the present value for a bond that promises to pay interest of Rs 150 a year for thirty years and Rs 1,000 at maturity. This first interest payment is paid one year from now. Use a rate of discount of 8 per cent.

Reference no: EM132609090

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