Question One

1. A relative has just won a state lottery paying k 20 million in instalments of k1 million per year for twenty years. Your relative states that she is k20 million richer. Is she correct? Create a simple a example for two years to illustrate your position with an interest of 10%
2. What is the yield to maturity on a simple loan for k1 million that requires a repayment of k2 million in five years time?
3. What is the yield to maturity of a discount bond currently selling for k4000 that matures in one year with a face value of k5000?
4. What is the current yield on a k10, 000, 5% coupon bond selling for k9,000?
5. What is the current yield on 30 year coupon bond with a face value of k100,000 and a 3% coupon selling for a price today of k95,000?
6. What is the yield to maturity on a no coupon k100,000 T bond that comes due in 2 years and which sells for a price today of k96, 000?
7. If a security pays k110 next year and k121 the year after that, what is its yield to maturity if it sells for k200?