1. A new machine will cost $50,000. The machine is expected to last 10 years and have no salvage value. If the interest rate is 15%, calculate the PW's standard deviation. P 0.3 0.4 0.3 Annual Savings $9000 $10,500 $12,000
2. Suppose that you have a four-year bond which has a 2 percent coupon rate, has a $100 face value, and pays annual coupons. Market yields for this type of bond are 4 percent. What is the modified duration of this bond?
3. The Milken Company is offering you an investment that promises you $10,000 at the end of 14 years if you invest $ 5,381 today. What is the annual return on this investment?