3. Present Value of Annuity and Perpetuity - Show your steps! (You must simplify your answer use the formula for Geometric series.) 1+i A bond with a face value of y pays out interest at rate r annually. The discount rate you should use for the bond is i. (That is, the present value of $1 received a year from now is $11; and the present value of 1 dollar received 2 years from now is $ (1+1)².) What is the present value of owning the bond that pays its first interest a year from now if (a) The bond pays interest for n years and pays back the face value at the last year. (b) The bond pays interest forever and never pays back the face value.

3. Present Value of Annuity and Perpetuity - Show your steps! (You must simplify your answer use the formula for Geometric series.) 1+i A bond with a face value of y pays out interest at rate r annually. The discount rate you should use for the bond is i. (That is, the present value of $1 received a year from now is $11; and the present value of 1 dollar received 2 years from now is $ (1+1)².) What is the present value of owning the bond that pays its first interest a year from now if (a) The bond pays interest for n years and pays back the face value at the last year. (b) The bond pays interest forever and never pays back the face value.

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 8MC: Define the stated (quoted) or nominal rate INOM as well as the periodic rate IPER. Will the future...

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