1. The Pan-Canadian Pacific Atlantic Maritime Prairie Territorial Railroad Company (PCPAMPTRC, for short) issued a bond that promises to pay $100 per year perpetually. Sienna bought the bond when it was issued, and she is planning to sell the bond five years from now. If similar investments are expected to yield 8% at that time, how much will the bond be worth?

2. Davina completed her business degree at the University of Calgary five years ago, after which she applied for a position with a Saskatchewan-based venture capital firm. She soon realized that she had convocated at the right time - between her high marks and an upsurge in the markets, she had her choice of employers. In fact, one company offered her either a signing bonus of $100,000 when she started working for them or a lump sum of $150,000 three years after her hire date. If Davina could earn 7% on her invested funds at the time, which of the following would have been best for her to do?

Take the lump sum because it has the lower future value.

Take the signing bonus because it has the higher future value.

Based on these numbers, you are indifferent between the two.

Take the signing bonus because it has the lower present value.

Take the lump sum because it has the higher present value.