Question

The AW values of three Independent projects are shown below Annual Worth, Slyr Projects A -1,000 B +12,000 C +5,000 On the basls of these results, the declslon is to: Select project A only Select project B only Select project C only Select projects B and C Question 22 (5 points) One of your friends purchased a zerO coupon corporate bond (lLe, a bond that has no interest payments) for $4.850. The bond has a face value of $25,000 and is due in 12 years. If the bond is held to maturity, what rate of return will your friend make on the investment? 14.64% 415.00 % The rate of return cannot be calculated with the information given 11.55%

Answer 1

ANSWER:

1) Select projects b and c as the annual worth is positive.

2) fv = $25,000

pv = $4,850

n = 12

fv = pv * (1 + r) ^ n

25,000 = 4,850 * (1 + r) ^ 12

25,000 / 4,850 = (1 + r) ^ 12

5.1546 = (1 + r) ^ 12

(5.1546) ^ 1 / 12 = 1 + r

1.1464 = 1 + r

r = 1.1464 - 1

r = 0.1464 or 14.64%

so the correct answer is 14.64%