Thorton Will Receive an Inheritance of $500,000 Three Years from Now

question 44

Multiple Choice

Thorton will receive an inheritance of $500,000 three years from now. Thorton's personal discount rate corresponds to a 10% interest rate compounded semiannually. Which of the following values is closest to the amount that Thorton should accept today for the right to his inheritance?

• A) $373,108
• B) $375,657
• C) $665,500
• D) $670,048

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Definitions:

Yield To Maturity

Yield to maturity is the total return anticipated on a bond if the bond is held until the end of its lifetime.

Coupon Rate

The interest rate stated on a bond or other fixed-income security, representing the annual interest payment divided by the bond's face value.

Market Price

The real-time price for buying or selling an asset or service.

Face Value

The nominal or dollar value printed on a security or currency, indicating its legal worth.