2 parts

A bond with a $1,000 face value and a 6 percent annual coupon pays interest semiannually. The bond will mature in 10 years. The annual yield to maturity is 8 percent and the next coupon payment will be made in 6 months. Assuming semi-annual compounding, the bond's price today falls in which of the following ranges? Less than or equal to $850 Greater than $850 but less than or equal to $900 Greater than $900 but less than or equal to $950 Greater than $950 but less than or equal to $1,000 O Greater than $1,000 You have just won a lottery. For a prize, you (or your heirs) will receive a cash payment each year forever. You will receive your first payment of $1,000 one year from today. However, after that, your payment will increase by an annual rate of 15% for the next two years (i.e., you receive $1,150 two years from today and $1,322.50 three years from today) and will then increase at an annual rate of 8% forever. What is today's value of the cash flows if the appropriate discount (interest) rate is 10%? Select the range that includes the correct answer. Less than $55,000 Greater than or equal to $55,000 but less than $56,000 Greater than or equal to $56,000 but less than $57,000 Greater than or equal to $57,000 but less than $58,000 Greater than or equal to $58,000