1. Calculate the nominal annual rate of discount convertible semiannually that is equivalent to a nominal annual rate of interest of 10% per year convertible monthly.
2. What is the value of a bond that has a par value of $1,000, a coupon rate of 11.95 percent (paid annually), and that matures in 15 years? Assume a required rate of return on this bond is 12.69 percent.
3. You have just won the lottery! You now must choose between receiving an immediate payment of $5 million or a $500,000 payment at the end of each year for the next 20 years (a total of $10 million). How much is the recurring $500,000 option worth today?