Question: A contract agrees to pay a $ 400,000 bonus today. In Year 1, the contract will pay $ 200,000. In each of Years 2 thru and including 4, the agreement will pay $ 300,000. Assuming a 10% Opportunity Cost,
please determine the present value of this agreement.
2. Please provide a checkpoint for your answer to Question # 1 by:
a. Finding the ..value at Year 4, then
b. Finding the value today of the value at Year 4.
3. A firm wants to issue a 2 year Bond at a 4% Coupon Rate. The Yield To Maturity is 8%. Assuming that interest is to be paid annually, please determine the Price at which each Bond will be issued.
4, Please confirm your Bond Price in # 3 by confirming the Yield To Maturity.
5. Please confirm your Bond Price in # 3 by:
a. Finding the Future Value, then
b. Finding the Present Value of the Future Value.
6. Now perform computations for # 3 - # 5 assuming that interest is paid semi- annually.