Question
2. You have a great idea. You want to get into the farming business. Using the information below, tell me how much youd be willing
2. You have a great idea. You want to get into the farming business. Using the information below, tell me how much youd be willing to pay today for an acre of good farmland:
Bushels per acre of corn: 177 Price per bushel: $7.26 Value the investment based off of 10, 15, and 20 years of farming. Value the investment based on a range of discount rates.
Using your the formula for PDV, tell me the lowest price youd be willing to pay and the highest price. Now, given that information, what do you make of the current price per acre of farmland in Iowa of $13,860. Would you be buying?
3. In your own words, what is the Yield-to-Maturity? How is it different from the coupon rate? The ROR?
4. Using the PDV formula, what is the relationship between the price of a bond and the yield on that bond? Explain this relationship in your own words.
5. Using the PDV formula, explain how the discount rate works and why it matters. Apply this to the following assets: a. Crypo b. A House c. A car d. College education
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