Answer the following in complete sentence
1. Why would a government choose to issue a perpetuity which requires payment forever, instead of a terminal loan, such as a fixed-payment loan, discount bond or coupon bond?
2. A lottery claims its grand prize is $10 million, payable over 5 years aar $2,00,000 per year. If the first payment is made immediately. What is this grand prize really worth? Use an interest rate of 6%
3. A $1000 face value bond has a 10% coupon rate, its current price is $960, and its price is expected to increase to $980 next year. Calculate the current yield the expected rate of capital gain, and the expected rate of return.
4. 'what effect will a sudden increase in peoples expectations of future real estate prices affected interest rates.