A $50 000, 6% bond with semi-annual coupons redeemable at par on April 25, 2018, was purchased on June 25, 2009, at 94.378. What was the approximate yield rate?

2. An obligation can be settled by making a payment of $7500.00 now and a final payment of $10 000.00 in five years. Alternatively, the obligation can be settled by payments of $750.00 at the end of every three months for five years. If interest rate is 10% compounded quarterly, determine the preferred alternative.

3. A selection has to be made between two investment alternatives. The first alternative offers a net return of $42 430.00 after three years, $30 000.00 after five years and $26 000.00 after seven years. The second alternative provides a net return of $13 000.00 per year for seven years. Determine the preferred alternative according to the discounted cash flow criterion if money is worth 11%.

4. A contract is estimated to yield net returns of $7000.00 quarterly for seven years. To secure the contract, an immediate outlay of $80 000.00 and a further outlay of $60 000.00 three years from now are required. If interest is 6% compounded quarterly, determine if the investment should be accepted or rejected.

5. A once in a lifetime project requires an immediate outlay of $100 000 and $25 000 at the end of each year for 3 years. Net returns are nil for the first 3 years and $30 000 per year thereafter for fourteen years. What is the net present value of the project at 16%?

Answer rating: 100% (QA)

1 To calculate the approximate yield rate of the bond we can use the formula for yield to maturity The yield to maturity is the total return anticipat... View the full answer