Solutions to Chapter 1

14. In each case, we solve the following equation for the missing variable: Price = $1,000/(1 + y)maturity. Price Maturity (Years) Yield to Maturity $300.00 30.00 4.095% $300.00 15.64 8.000% $385.54 10.00 10.000% 15. PV of perpetuity = coupon payment/rate of return. PV = C/r = $60/0.06 = $1,000 ................
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