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Tricky questions
24-02-2006, 02:25 AM
#1
How do you actually work them out?
Which of the following is true of the payback rule of investment appraisal?
a. It is consistent with shareholder wealth maximisation
b. It is based on accounting rather than cash flow data
c. The opportunity cost of capital is taken ino account
d. Early cash flows carry more weight
e. It is based on discounted cash flow analysis
Warner Pacific Airlines Ltd have 5% coupon bonds on the market that have 12 years left to maturity. The bonds have a face value of $100 and make annual payments. If the yield to maturity on these bonds is 10%, what is the current bond price?
a. $100
b. $60.45
c. $105
d. $160
e. $65.93
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