What is the relationship between present value and future value?
What is the relationship between the concepts of net present value and shareholder wealth maximization?
Garret Erdle has just turned 26 years of age. Although Garrett currently has a negative net worth, he expects to pay off all of his financial obligations within four years and then to embark on an aggressive plan to save for retirement. He wishes to be able to withdraw $100,000 per year during the first ten years of retirement and $150,000 during the next 10 years of retirement. As a precaution against unexpected longevity, he would like to have a net worth of $500,000 after the withdrawal on his 80th birthday.
BCC has issued 8 1/8 percent debentures that will mature on July 15, 2034. Assume that interest is paid and compounded annually. If an investor purchased a $1,000 denomination bond for $1,025 on July 15th, 2014, determine the bond’s yield-to-maturity. Explain why an investor would be willing to pay $1,025 for a bond that is going to be worth only $1,000 at maturity.
In 2004, BCC issued 8 5/8 percent debentures that will mature on December 1, 2044.
A. If an investor purchased one of these bonds on December 1, 2014, for $1,050, determine the yield-to-maturity. Explain why investors would be willing to pay $1,050 on December 1,2014, for one of these bonds when they are going to receive only $1,000 when the bond matures in 2044.
