2. Sharon Smith will receive $1 million in 30 years. As an alternative, she can receive...

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?

Expert Solution

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

jeff jeffy answered 3 years ago

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