Unformatted text preview: Find the yield rate. (j 2 = 11.79%) 5. A $5,000 bond paying interest at j 2 = 10%, redeemable in 5 years, is purchased for $4,900. Find the yield rate. (j 2 =10.52%) 6. A company is offered a contract promising annual returns of $36,000 for 7 years. If accepted, the company must spend $150,000 immediately for plant expansion. Should the company accept the contact if the required rate of return is 12%? ( yes, NPV = $14,295) 7. A business has 2 investment alternatives. The first requires an immediate outlay of $20,000 and offers a return of $70,000 after 7 years. The second requires a $20,000 outlay in return for which $6,500 will be received at the end of each year for the next 8 years. If the required rate of return is 15% effective, which investment offers the best return? ( NPV(1) = +$6,316, NPV(2) = +$9,168*) 8. Find the internal rate of return for each investment alternative from question 7. (IRR(1)=19.60%, IRR(2)=27.99%)...
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This note was uploaded on 10/04/2011 for the course MATH 1175 taught by Professor Jenny during the Spring '10 term at Fanshawe.
 Spring '10
 Jenny
 Math

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