Consider the Following Timeline Detailing a Stream of Cash Flows

question 85

Multiple Choice

Consider the following timeline detailing a stream of cash flows: If the current market rate of interest is 10%, then the present value of this stream of cash flows is closest to:

• A) $674
• B) $600
• C) $460
• D) $287

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Definitions:

Bond Yields

The amount of return an investor realizes on a bond, usually expressed as a percentage of the bond's value.

Present Value

The present worth of a future sum of money or series of cash flows, when discounted at a specific rate of interest.

Coupon Payment

The interest payment made to the bondholders by the issuer of the bond.

Term to Maturity

Term to Maturity is the remaining time until a debt instrument, such as a bond, reaches its due date and the principal must be repaid.