Calculating the Time Value of Money

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Chapter 9, Problem 2

 

What is the present value of:

 

A.      $7,900 in 10 years at 11 percent?

 

B.      $16,600 in 5 years at 9 percent?

 

C.      $26,000 in 14 years at 6 percent?

 

Chapter 9, Problem 5

 

What is the present value of:

 

A.      $7,900 in 10 years at 11 percent?

 

B.      $16,600 in 5 years at 9 percent?

 

C.      $26,000 in 14 years at 6 percent?

 

 

 

Chapter 10, Problem 3

 

                Exodus Limousine Company has $1,000 par value bonds outstanding at 10 per- cent interest. The bonds will mature in 50 years. Compute the current price of the bonds if the percent yield to maturity is:

 

A.      5 percent.

 

B.      15 percent

 

 

 

Based on bonds paying 10 percent interest for 20 years. Assume interest rates in the market (yield to maturity) decline from 11 percent to 8 percent:

 

a.            What is the bond price at 11 percent?

 

b.            What is the bond price at 8 percent?

 

c.             What would be your percentage return on investment if you bought when rates were 11 percent and sold when rates were 8 percent?

 

 

 

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