Your Firm's Existing Bonds Trade with a Yield to Maturity

question 88

Multiple Choice

Your firm's existing bonds trade with a yield to maturity of eight percent. The state of Missouri has offered to loan your firm $10,000,000 at zero percent for five years. Repayment will be of the form of $2,000,000 per year for five years the first payment is due in one year. What is the value of this offer?

• A)$4,729,622.75
• B)$2,014,579.93
• C)$0
• D)$196,929.88
• E)None of the above

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Definitions:

Fixed Ratio

A schedule of reinforcement where a response is rewarded only after a specified number of responses.

Fixed Interval

A reinforcement schedule that rewards the first response after a set period has passed.

Variable Ratio

A reinforcement schedule used in operant conditioning that rewards a response after an unpredictable number of responses, leading to high and steady rates of responding.

Fixed Interval

A schedule of reinforcement where the first response is rewarded only after a specified amount of time has elapsed.