Determine the value of the investment today

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Question

(a) When interest rates fall, how might businesses and consumers change their economic behavior.

(b) Determine the present value of a cash flows stream of $2,250 to be received every year at a required rate of return of 5%. How the value would differ if the cash flows stream starts at year 4 at the same required rate of return. Round your answer to 2 decimal places. Discuss why the values of the two cash flows streams is different.

(c) A company has just issued a $1,000 par value zero coupon bond, due to mature 15 years from today. If the current market price of the bond is 315.24, what is the rate of return on this bond?

(d) Twenty-five years ago, you invested $10000 in an account paying an annual interest rate of 5.75%. Determine the value of the investment today and the interest component earned on this investment.

Reference no: EM133116412

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