Problems on present value and bonds

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Reference no: EM1353855

1. Given the following cash flows, what is the present value if the discount rate is 8%?
Yr1 $200, Yr2 $350, Yr3 $800, Yr4 $1,125
a.$1,115.07
b.$1,947.23
c.$2,165.70
d.$2,358.96
e.$2,922.62

6. A bond with an annual coupon of $100 originally sold at par for $1,000. The current market interest rate on this bond is 9%. Assuming no change in risk, this bond would sell at a __________ in order to compensate _____________________.

a. premium; the purchaser for the above market discount rate
b. discount; the purchaser for the above market discount rate
c. premium; the seller for the above market coupon rate
d. discount; the seller for the above market coupon rate
e. discount; the issuer for the higher cost of borrowing

Reference no: EM1353855

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