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/sci/ - Science & Math

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5565312 No.5565312 [Reply] [Original]

A 10-year bond promises to pay 5% of its face value of 100 each year until maturity, and at the maturity date it will also repay its face value. The market discount rate for this bond is also 5%. What is the value of this bond?

>> No.5565345

100$ dumbass
Fucking listen in class

>> No.5565361

On your business calculator:

>FV: $100
>rate: 5
>periods (n): 10
>payment: $5
>calculate PV

>$100

Also, the easier way: >>5565345

>> No.5565378

>>5565345
>>5565361
But surely it's worth 0.

>> No.5565388

Is this present value or net present value?

>> No.5565391

just saw this 3 secs ago in /g/
fuck off

>> No.5565401

>>5565378

It's worth $100 - it could be used if you think that inflation will be over 5%.

>>5565388

Net of what? Same shit.

>> No.5565416
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5565416

Is Who wants to be a millionaire just a game of luck?

I mean, there's 33.34% chance of being right unless the person happens to know the right answer, and lifelines can only get you so far into the game.

Let's say there are 15 questions with 4 choices each. Let's also say there are 3 lifelines: call-a-friend, 50-50, and ask-the-audience.

For each of the 15 questions, there is only 1 correct answer, and 3 incorrect answers, so immediately your chances are 1/3 = 33.34%. You can use each lifeline once. Using phone-a-friend, let's say gives you a 95% chance the person you call is correct. So 1 question is 95%. Similarly, we can say ask-the-audience gives you a 95% chance. Finally, 50-50 will remove 2 wrong answers, so you have 1 right answer and 1 wrong answer, so you basically know the answer. To recap:

Question 1: 33.34%
Question 2: 33.34%
Question 3: 33.34%
Question 4: 95% <--- ask-the-audience
Question 5: 33.34%
Question 6: 33.34%
Question 7: 33.34%
Question 8: 33.34%
Question 9: 95% <--- phone-a-friend
Question 10: 33.34%
Question 11: 33.34%
Question 12: 33.34%
Question 13: 33.34%
Question 14: 33.34%
Question 15: 100% <--- 50-50
Total: 690.08%
Divided by 15 questions = 46.00%
So basically, it's more a less a game of chance, but more than half the people on the show will lose, so it's not very fair. That show is making tons of money off of people.

>> No.5565422

>>5565401
But in class our teacher mentioned if it has matching return and discount % it has 0 net present value

>> No.5565474

>>5565422

It might have zero ECONOMIC value, but present value means just what it says - present value of future payments. I guess if he came up with some "net value" definition that no one uses, ever, then maybe you should put down 0.

Your prof sounds like a fag, honestly.

There is a reason people buy treasury bonds / notes that yield virtually nothing - it can be a hedge against inflation, though usually they are not.