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Payback period/interest rate risk

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Question 5
Wiley Corporation is considering a project which has up-front cost paid today at t=0. The project will generate positive cash flows of $85,000 a year at the end of each of the next five years. The project's NPV is $100,000 and the company's WACC is 10 percent. What is the project's simple, regular payback?

Question 6
Which of the following Treasury bonds will have the largest amount of interest rate risk (price risk) and why?
A. A 7% coupon bond which matures in 12 years
B. A 9% coupon bond which matures in 10 years
C. A 12% coupon bond which matures in 7 years
D. A 7% coupon bond which matures in 9 years
E. A 10% coupon bond which matures in 10 years

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Solution Summary

The solution explains two problems relating to payback period and interest rate risk

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