The interest rate on a one-year bond selling today is 4% and the expected interest rate on a one-year bond selling one year from today is 2%. If the liquidity premium is 0.5%, then according to liquidity premium theory, the interest rate on a two-year bond selling today is about

A newly issued 20-year maturity, zero-coupon bond is issued with a yield to maturity of 9.5% and face value $1,000. Find the imputed interest income in: (a) the first year; (b) the second year; and (c) the last year of the bond’s life. (Round your answers to 2 decimal places.)

kennedy corp is thinking in investing in a new location the managers think that opening a new store will cost 1170. they expect the following years profits 250 in year one, 370 in year 2, in year 3 650, AND 600 IN YEAR 4. THE CURRENT wacc IS 8% WHAT IS THE npV OF THIS INVESTMENT?

You are offered a chance to buy an asset for $8,000 that is expected to produce cash flows of $750 at the end of Year 1, $1,000 at the end of Year 2, $850 at the end of Year 3, and $6,250 at the end of Year 4. What rate of return would you earn if you bought this asset?

Based on US mortality statistics, the probability that a 30-year old white female will die within the next year is 0.000642 (and so the probability of living another year is 1-0.000642 = 0.999358). What premium should a life insurance company charge to break even on a $500,000 one-year term insurance policy for a 30-year old white female? Please select the closest response.

After graduation, you start your job with a salary of $70,000 per year (paid annually). Starting the second year, your salary increases by a rate of 3% per year through year 30 and then you retire. Determine the amount available in your retirement account when you retire if you put 12% of salary in the retirement account on an annual basis. Suppose the interest rate on the retirement account is 5% per year.

Luke just purchased a tractor for the farm. He will receive free maintenance the first year. After the first year he expects his maintenance costs to be $250 in the second year and then increase by $250 each year thereafter (i.e. $500 in year 3, etc.). How much money should Luke set aside for maintenance costs when he purchases the tractor? The tractor is expected to last 15 years. Assume 5% interest.

Bixby Inc. is evaluating expansion into a new market. The firm estimates an after-tax cost of $1,400,000 and forecast that such an investment will yield after-tax cash flows for 5 years: $600,000 in year 1, $700,000 in year 2, $700,000 in year 3, $200,000 in year 4, and $300,000 in year 5. If the CFO of Bixby has set a required payback period of 2.5 years, what is the project’s actual payback period (in years) and should they pursue it?