1. A $1,000,000 lottery prize pays $50,000 per year for the next 20 years. If the current rate of return is 4.5%, what is the present value of this prize?
2. An insurance policy offers you the option of being paid $750 per month for 20 years or a lump sum of $50,000. Which has the greater value if the current rate of return is 4.5% compounded monthly and you expect to live for at least 20 years?
3. A bond issued by Live Nation is currently trading at $89.50, pays a coupon rate of 5.625%, and matures in 12 semesters. Using the bond yield calculator, what is its yield to maturity?
4. What is the difference between par value and market value of a bond?