How Much Would You Pay for This Bond Today?
Autor: antoni • June 15, 2012 • Essay • 472 Words (2 Pages) • 1,777 Views
How much would you pay for this bond today?
In order to receive $2,000 in one year from today, it would be wise to first research the company to see how well the company is doing. For the company I chose, Lowe's, I decided that it would be a wise choice to invest with them. The company continues to grow, even during the economy we are in today, which is a good sign that they will survive.
Researching Lowe's stocks and other information regarding the company, I decided that a safe price would be around $1900. To get technical I decided to do an equation to find out a round up number to the price of what I should pay today. With the equation with a 5% for one year, left me at $1,904.76, which is what I would have to pay today in order to receive $2000 in one year.
PV=2000[1/(1+.05)^1 ]
PV=2000(.95238)
PV=$1,904.76
Based on your answer to the previous question, what would be your discount rate for this bond? Use the present value formulas from the background materials and show your work.
As discussed above, I already showed my work as to what discount rate I would ask for to receive the $2,000 in one year. In order to receive $2,000 in one year from today I would have to ask for a discount rate of 5%. This will achieve the amount that will be needed to get the number in the end.
PV=2000[1/(1+.05)^1 ]
PV=2000(.95238)
PV=$1,904.76
Pick two other companies in the same industry as your SLP company.
If I were to invest in another company that is compared to my SLP company, then it would have to be Home Depot. Although I don't really care for Home Depot, they have different variety of the same type of products. For example, they have different design
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