In: Finance
2. Sharon Smith will receive $1 million in 30 years. As an alternative, she can receive $90,000 today. If we use a discount rate of 8%, which should she choose?
3. Yesterday Google issued 20 Year bonds with a 5% Interest Rate/Coupon when the required rate of return or yield to maturity was 5%. Today, investors are requiring an 8% return or yield to maturity. What will be the new market price of the bond?
2
Calculator | |
Inputs: | |
FV | 1,000,000.00 |
PMT | - |
Rate (I/Y) | 8.000% |
Term N | 30.00 |
Output: | |
PV | 99,377.33 |
Present value of 1million is 99,377.33
Choose 1 million in 30 years
2
Calculator | |
Inputs: | |
FV | 1,000.00 |
PMT | 50.00 |
Rate (I/Y) | 8.000% |
Term N | 20.00 |
Output: | |
PV | 705.46 |
Price of bonds is:
705.46