Question
Imagine you have won the lump sum amount of $ 1300 in a recent contest. However, you must wait until the end of 7 years
Imagine you have won the lump sum amount of $1300 in a recent contest. However, you must wait until the end of 7 years to receive the money. However, you would prefer a different pattern of payments: $300 today and then receive some unknown LUMP SUM (i.e. one time) amount that will be received in 7 years. Using an interest rate of 3.50%, determine the unknown lump sum amount that would make the present value of both prizes equivalent.
Two annual coupons bonds both mature in 7 years. Bond A has a coupon rate of 6.00% and a yield to maturity of 10.00%. Bond B has a coupon rate of 10.00% and a yield to maturity of 6.00%. Select one of the following statements that is true about Bond A and Bond B.
| The price difference between Bond A and Bond B is $2028.56 | ||
| Bond B is $1223.30 greater than Bond A | ||
| Bond A is $805.26 greater than Bond B | ||
| The price difference between Bond A and Bond B is $418.03 | ||
| All of the Above |
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