1. What is the present value of the following uneven cash flow stream −$50, $100, $75, and $50 at the
end of Years 0 through 3? The appropriate interest rate is 10%, compounded annually.
2. Suppose that on January 1 you deposit $100 in an account that pays a nominal (or quoted) interest
rate of 11.33463%, with interest added (compounded) daily. How much will you have in your account
on October 1, or 9 months later?
A firm issues a 10-year, $1,000 par value bond with a 10% annual coupon and a required rate of return is
3. What is the yield to maturity on a 10-year, 9% annual coupon, $1,000 par value bond that sells for
$887.00? That sells for $1,134.20? What does a bond selling at a discount or at a premium tell you
about the relationship between rd and the bond’s coupon rate?
4.What are the total return, the current yield, and the capital gains yield for the discount bond in
Question #3 at $887.00? At $1,134.20? (Assume the bond is held to maturity and the company does
not default on the bond.)