Question
1) An annuity pays $47 per year for 22 years (end year payments). a) What is the present value (PV) of this annuity at the
1) An annuity pays $47 per year for 22 years (end year payments). a) What is the present value (PV) of
this annuity at the beginning of those 22 years, given that the discount rate is 8% yield to
maturity? (Put your answer to the nearest cent). b) Take the same annuity from above. What is the future value (FV) of this annuity at the end of
those 22 years, again given that the discount rate is 8% yield to maturity?
2)A 12-year annual coupon corporate bond can be bought in the market place for $925. It
pays annual interest of $60 and has a face value of $1000, its market rate of return should
be 7 percent. By how much is the bond mispriced ?
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