1) You wrote the piece of software which does the better job of permitting computers to network than any other program designed for this purpose. Large networking company wishes to incorporate your software into their systems and is presenting to pay you $456,000 today, plus $456,000 at the end of each of the given six years for permission to do this. If suitable interest rate is 7%, determine the present value of cash flow stream that company is presenting you?

2) Jasmine is considering investing in the stock and is aware that return on that investment is mainly sensitive to how economy is performing. Her examination suggests that 4 states of economy can affect return on investment. By using table of returns and probabilities below, determine:

           Probability  Return
Boom    0.7           25.00%
Good     0.1           15.00%
Level      0.1           10.00%
Slump     0.1          -5.00%

i) Compute the expected return of Jasmine’s investment?

ii) Compute Standard variation?

3) Edward Price purchased 10-year bonds issued by Harvest Foods 5 years ago for= $939.80. The bonds make semi-annual coupon payments at the rate of 8.4%. If present price of bonds is $1,025.17, find out the yield that Edward would earn by selling the bonds today?