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Jean Splicing will receive $8,500 a year for the next 15 years from her trust. If a 7 percent interest rate is applied, what is the current value of the future payments?

Exodus Limousine Company has $1,000 par value bonds outstanding at 10 percent interest. The bonds will mature in 50 years. Compute the current price of the bonds if the percent yield to maturity is:
a. 5 percent.
b. 15 percent.

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Solution Summary

The solution explains the calculation of present value and how to calculate the price of a bond

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1. This is a annuity problem for which we have to find the present value of an annuity. The PV of an annuity can be got by using the PVIFA table. The annuity amount multiplied by the annuity factor gives the present value. For 15 years and 7% the annuity factor from PVIFA table is 9.108. The annuity ...

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