Approximating the price of long-term bonds the present value of an infinite stream of dollar payments of $z (that starts next year) is $z/i when the nominal interest rate, i, is constant. this formula gives the price of a consol—a bond paying a fixed nominal payment each year, forever. it is also a good approximation for the present discounted value of a stream of constant payments over long but not infinite periods, as long as i is constant. let’s examine how close the approximation is.
a. suppose that i = 10%. let $z = 100. what is the present value of the consol?
b. if i = 10%, what is the expected present discounted value of a bond that pays $z over the next 10 years? 20 years? 30 years? 60 years? (hint: use the formula from the chapter but remember to adjust for the first payment.)
c. repeat the calculations in (a) and (b) for i = 2% and i = 5%.
Answers: 2
Business, 21.06.2019 20:30, Scourge927
marketing strategies should be established before marketing objectives are decided. t/f
Answers: 1
Business, 22.06.2019 16:00, yesenia1162
What is used by accountant to analyze transactions ?
Answers: 2
Business, 22.06.2019 20:10, janayflowers042
Russell's is considering purchasing $697,400 of equipment for a four-year project. the equipment falls in the five-year macrs class with annual percentages of .2, .32, .192, .1152, .1152, and .0576 for years 1 to 6, respectively. at the end of the project the equipment can be sold for an estimated $135,000. the required return is 13.2 percent and the tax rate is 23 percent. what is the amount of the aftertax salvage value of the equipment assuming no bonus depreciation is taken
Answers: 2
Approximating the price of long-term bonds the present value of an infinite stream of dollar payment...
Mathematics, 20.09.2020 07:01
English, 20.09.2020 07:01
Mathematics, 20.09.2020 07:01
Mathematics, 20.09.2020 07:01
Mathematics, 20.09.2020 07:01