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Consider the following cash flows: YEAR 0 1 2 3 4 5 150 160 170 180 200 If the market interest rate is 12% a.

Consider the following cash flows:

YEAR 0 1 2 3 4 5

150 160 170 180 200

If the market interest rate is 12%

a. What price would you pay?

b. What total wealth do you expect after 2.5 years?

c. What is the duration?

d. If interest rates drop to 11% what is your wealth expected after 2.5 years?

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