You have just received a windfall from an investment you made in a friend's business. She will
Question:
You have just received a windfall from an investment you made in a friend's business. She will be paying you $49,725 at the end of this year, $99,450 at the end of next year, and $149,175 at the end of the year after that (three years from today). The interest rate is 4.1% per year.
a. What is the present value of your windfall?
b. What is the future value of your windfall in three years (on the date of the last payment)?
5. You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 17 years. You expect that the drug's profits will be $3
million in its first year and that this amount will grow at a rate of 2% per year for the next 17 years. Once the patent expires, other pharmaceutical companies will be able to produce the same drug and competition will likely drive profits to zero. What is the present value of the new drug if the interest rate is 9% per year?
Part 1 The present value of the new drug is $___million.(Round to three decimal places.)
8. Consider a 30-year Government of Canada bond with a face value of $1,000 that has a coupon rate of 5.8%, with semi-annual payments.
a. What is the coupon payment for this bond?
b. Draw the cash flows for the bond on a timeline.
9.
Expert Answer:
a To calculate the present value of the windfall Payment 1 in 1 year 49725 1 00411 4817023 Payment 2 ... View the full answer
