Imply about the students discount rate

Assignment Help Financial Management

Reference no: EM131016065

Suppose in August of 2015 a high school senior is offered on of the following two tuition vouchers: A voucher that pays $2000 for the upcoming academic year (2015) A voucher that pays $3000 2 academic years in the future (2017) Assume that the student’s decision is based solely on the time value of money. A) If the student chooses the first option what does that imply about the student’s discount rate? Explain or show how you reach your answer. B) Which option would we expect students with a 25% discount rate to choose? Show how you arrive at your answer.

Reference no: EM131016065

Questions Cloud

What is the arbitrage price of bond : Assume that there are two three-year bonds with face values equaling $1000. The coupon rate of bond A is .05 and .08 for bond B. A third bond C also exists, with a maturity of two years. Bond C has a face value of $1000; it has a coupon rate of 11%. ..

Find the minimum-risk portfolio : A stock portfolio P is comprised of three stocks A,B,C. The expected returns for the securities are .05 for stock A, .08 for Stock B and .18 for Stock C. The variance of returns for Stock A is .01, .16 for Stock B and .25 for Stock C. FIND THE MINIM..

What is before tax cost of debt for olympic : Olympic Sports has two issues of debt outstanding. One is a 9% coupon bond with a face value of $29 million, a maturity of 10 years, and a yield to maturity of 10%. The coupons are paid annually. What is before tax cost of debt for Olympic?

Start saving for retirement beginning next year : Your job pays you only once a year for all the work you did over the previous 12 months. Today, December 31, you just received your salary of $63,000 and you plan to spend all of it. However, you want to start saving for retirement beginning next yea..

Imply about the students discount rate : Suppose in August of 2015 a high school senior is offered on of the following two tuition vouchers: A voucher that pays $2000 for the upcoming academic year (2015) A voucher that pays $3000 2 academic years in the future (2017) Assume that the studen..

Which bond has the greatest interest-rate risk : Which bond has the greatest interest-rate risk? A 15-yr bond with a 4% coupon (no principal payments priot to maturity) the bonds in B and E tie for the highest interest rate risk.

What is company net income-comprehensive ratio calculations : The Moore Corporation had operating income (EBIT) of $850,000. The company's depreciation expense is $255,000. Moore is 100% equity financed, and it faces a 35% tax rate. What is the company's net income? Comprehensive Ratio Calculations. Find the pr..

What price would you estimate for halliford stock : Halliford Corporation expects to have earnings this coming year of $2.63 per share. Halliford plans to retain all of its earnings for the next two years. For the subsequent two years, the firm will retain 49% of its earnings. It will then retain 23% ..

Ignore any tax loss carry back or carry forward provisions : During 2014, Raines Umbrella Corp. had sales of $860,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $680,000, $85,000, and $180,000, respectively. In addition, the company had an interest expense of $55,0..

User Account

All Pages