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1. (a) (4 points) Explain what the following is saying financially about a start-up: A start-up's NPV at 15% is $18,000. (b) (4 points) Consider
1. (a) (4 points) Explain what the following is saying financially about a start-up: "A start-up's NPV at 15% is $18,000." (b) (4 points) Consider an investment that promises a fixed sequence of future cash flows. Suppose the investment has a required return rate rrrr. If you increase rrrr, will the present value of the investment increase or decrease? Justify your answer. (c) (4 points) You just took out a loan in the amount A, payable over n payment periods with payments per period P. In terms of these variables, what is the total interest you will have paid over the lifetime of the loan? (You don't have to re-derive anything.) 2. (a) (4 points) (For this part, no explanation is necessary.) You buy a newly-minted 30-yr bond with coupon rate rc; 18 years later, you sell it at its maturity value; what will its yield to maturity ry be when you sell it? (b) (8 points) A bond has coupon amount C and maturity value M. If there are n coupon payments remaining and ry is the yield to maturity, find the future value at maturity of the bond's cash flow
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