1. A financial company that advertises on TV will pay you $60,000 now for annual payments of $10,000 that you are expected to received for a legal settlement over the next 10 years. You estimate your opportunity cost to be 10%. What is the present value of the $10,000 annual payments?
Based on your answer in the prior question, should you accept the $60,000 today instead of annual payments of $10,000/year for 10 years, assuming a 10% opportunity cost?
2. What is the percentage change in price for a zero coupon bond if the yield changes from 7?% to 8.5%? The bond has a face value of $1000 and it matures in 12 years . Use the price determined from the yield , 7% as a base in the percentage calculation. The percentage change in the bond price if the yield changes from 7% to 8.5% is __________.