What is the price of a perpetuity

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Reference no: EM131926523

Question: 1. A $1000 bond with a coupon rate of 6% is selling at par value, what is market required rate of return?

2. A $1000 bond makes annual payments of $60. If it offers a current yield of 6%, what is the price of the bond?

3. What is the price of a perpetuity that pays $5 annually and the required rate of return is 4%?

4. What is the price of a perpetuity that pays $50 annually and the required rate of return is 6%?

5. What is the price of a perpetuity that pays $17.50 semi-annually and the required rate of return is6%?

6. How long will it take to double your money if the rate of interest is 4%, 7%, 12% ?

7. ABC Start-up wants to fund the purchase of a new manufacturing plant that will cost $15,000,000 by selling zero coupon bonds that accrue interest of 4% per year. If ABC sells bonds that promise to pay $1000 on the date of maturity (10 years), how many bonds must ABC issue? (Hint this is a breakeven analysis and the solution is not to divide $15,000,000 with $1000) Show work

Reference no: EM131926523

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