Who plans to live in germany for the rest of life

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Reference no: EM131993112

1. Assuming a discount rate of 7%, which of the following options is the most valuable:

a. a lump sum of $100,000, received at the END of year 7.

b. a perpetuity of $100,000 per year, with the first payment occurring at the BEGINNING of year 7.

c. An Annuity due of $100,000 per year for 7 years, with the first payment occurring at the BEGINNING of year 7.

d. An ordinary annuity of $100,000 per year for 7 years, with the first payment occurring at the END of year 7.

2. An investor who plans to live in Germany for the rest of his life and has all of his savings invested in 10-year US Government treasury bonds should be most concerned about which of the following risks?

a. current risk and interest rate risk

b. default risk and currency risk

c. interest rate risk and liquidity risk

d. liquidity risk and default risk

Reference no: EM131993112

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