1. A bond with an annual coupon rate of 6.5%, maturing in 10 years at a value of $1,000 and a current market price of $899.35, will have a yield to maturity (using the approximation formula) of
A. between 8.5% and 10%.
B. between 7.5% and 8.5%.
C. between 5% and 6%.
D. between 6% and 7.5%.
2. Your company also wants to invest in a project. The new investment has a return of $750,000 after 4 years and the cost of the investment is $500,000. Your company's interest rate is 6%. The project offers $100,000 the first year, $200,000 the second year, and $150,000 for the third and fourth years. What is the Present Value of the payments and should your company invest in this project?
$459,500 No.
$689,750 Yes.
$517,300 Yes.
$498,750 No.