Problem: Net Present Value
You have just paid $20 million in the secondary market for the winning Powerball lottery ticket. The prize is $2 million at the end of each year for the next 25 years. If your required rate of return is 8 percent, what is the net present value (NPV) of the deal?
Internal Rate of Return
What is the internal rate of return (IRR) of the Powerball deal in question above?
Modified Internal Rate of Return
What is the modified internal rate of return (MIRR) of the Powerball deal in question above?
Expected Rate of Return of Corporate Bond
Assume that Intel Corporations $1,000 face value 9 percent coupon rate bond matures in 10 years and sells for $1,100. If you purchase the bond for $1,100 and hold it to maturity, what will be your average annual rate of return on the investment?