A perpetuity that pays a coupon of $100 annually can be bought for $1,923.08. Which of the following statements is correct?

A.The yield to maturity equals 1.05%.

B.The bond can have more than one yield to maturity, depending on the time pattern of the cash flows.

C.The bond's yield to maturity does not exist because the perpetuity never matures.

D.The bond's yield to maturity can be calculated using the formula

E.None of the above is correct.

Suppose humans live to 85 years old with perfect certainty. Your neighbor, who is 60years old, has just won the "Cash For Life" lottery, which entitles him to collect $1million every year for life, starting now. You are 20years old. The discount rate is 5%. Which of the following statements is correct? If you offer to buy the winning ticket from your neighbor:

A.The minimum your neighbor will accept is $14.09million.

B.The maximum your neighbor can get from you is $20.16 million.

C.The minimum your neighbor will accept is $25 million.

D.The maximum your neighbor can get from you is $21.00 million.

E.None of the above is correct.

Consider a conventional cash flow where C₀ is negative and C₁ to C_n are all positive (ie, there is only one sign change), and with n < . For discount rates greater than zero, which of the following statements is correct?

A.NPV is greatest when the yield curve is upward sloping.

B.NPV is greatest when the yield curve is flat.

C.NPV is greatest when the yield curve is downward sloping.

D.NPV is unchanged regardless of the slope of the yield curve.

E.None of the above is correct.