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Unformatted text preview: is priced such that the yield to maturity is 7%. What is your approximate capital gain/loss (price today + dividend(s)  price paid)? (a) $10 (b) $80 (c) $111 ; Price Today = 80 A 4 . 07 + 1000 / (1 . 07) 4 ≈ 1033. 1033 + 80  1000 = 113. (d) $174 *** I’m throwing out this problem. The deﬁnition provided for capital gain is incorrect. The correct deﬁnition is “price today  price paid”. Helpful formulae: • Net Present Value = C + ∑ T t =1 C t (1+ r ) t • Annuity: PV = C r ‡ 11 (1+ r ) t · • Growing Perpetuity = C rg...
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 Spring '08
 Lim
 Time Value Of Money, $2, $67, Pacific Gas and Electric, approximate capital gain/loss

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